The Issue At issue in these proceedings is whether there exists a need for a new open heart surgery program in HRS District IX and, if so, whether the applications of St. Mary's Hospital, Inc. (St. Mary's), Boca Raton Community Hospital, Inc. (Boca), and Martin Memorial Hospital Association, Inc. (Martin), or any of them, for a certificate of need to establish such a program should be approved.
Findings Of Fact Case status In September 1989, Boca Raton Community Hospital, Inc. (Boca), St. Mary's Hospital, Inc. (St. Mary's), and Martin Memorial Hospital Association, Inc. (Martin), filed timely applications with the Department of Health and Rehabilitative Services (Department or HRS) for a certificate of need (CON) to establish a new open heart surgery program in HRS District IX. That district is comprised of Palm Beach, Martin, St. Lucie, Indian River, and Okeechobee Counties. Boca's and Martin's applications sought authorization to establish an adult open heart surgery program, whereas St. Mary's application sought authorization to establish an adult and pediatric open heart surgery program. On January 26, 1990, the Department published notice in the Florida Administrative Weekly of its intent to grant Boca's application, and to deny the applications of St. Mary's and Martin. St. Mary's and Martin filed timely protests to the Department's proposed action, and three existing providers of open heart surgery services in the district, NME Hospitals, Inc., d/b/a Delray Community Hospital (Delray), JFK Medical Center, Inc. (JFK), and AMI/Palm Beach Gardens Medical Center, Inc. (Palm Beach Gardens), timely protested the Department's intention to grant Boca's application or intervened to oppose the approval of any new open heart surgery program in the district. The applicants Boca, a 394-bed not-for-profit community hospital, is the southernmost hospital in Palm Beach County and HRS District IX, being located in Boca Raton, Florida, just two miles north of the Broward County/HRS District X line. It was established in the 1960's, and is a comprehensive hospital providing adult cardiac catheterization services, as well as most services available in an acute care facility, with the exception of a designated psychiatric unit, burn unit, and neonatal intensive care. During the period of April 1988 through March 1989, Boca performed 656 adult inpatient cardiac catheterizations, and referred 192 patients for open heart surgery between July 1988 and June 1989. By its application, Boca proposes to establish an adult open heart surgery program to enhance its cardiology services. Boca's primary service area covers a radius of approximately ten miles around the hospital, and it routinely serves patients from Boynton Beach, Palm Beach County, on the north to Pompano Beach, Broward County, on the south. Presently, three providers of open heart surgery services are located proximate to Boca: approximately 11 miles north of Boca, an average drive time of 17 minutes, is Delray, a current provider of open heart surgery services in District IX; approximately 21 miles north of Boca, an average drive time of 32 minutes, is JFK, a current provider of open heart surgery services in District IX; and approximately 15 miles south of Boca, an average drive time of 19 minutes, is North Ridge General Hospital (North Ridge), a current provider of open heart surgery services in District X and the recipient of the vast majority of referrals for open heart services from Boca. St. Mary's, a 378-bed not-for-profit community hospital located in West Palm Beach, Florida, is owned by the Franciscian Sisters of Allegheny, and has served the community for more than 50 years. In addition to the full range of medical surgical services, St. Mary's offers obstetrics, a Regional Perinatal Intensive Care Center (RPICC) -- levels II and III, blood bank, dialysis center, substance abuse center, hospice center, free-standing cancer clinic, adult inpatient cardiac catheterization laboratory, and children's medical services clinic. Upon the opening of its 40-bed psychiatric center, which is currently under construction, St. Mary's will be the largest hospital in District IX. During the period of April 1988 through March 1989, St. Mary's performed 254 adult inpatient cardiac catheterziations. By its application, St. Mary's proposes to enhance its existing services by establishing an adult and pediatric open heart surgery program. Currently, there are no pediatric open heart surgery programs in District IX. There are, however, two current providers of adult open heart surgery services located in Palm Beach County and proximate to St. Mary's: approximately 6 miles north of St. Mary's is Palm Beach Gardens, and approximately 11 miles south of St. Mary's is JFK. Martin, a 336-bed not-for-profit community hospital established in 1939, is located in Stuart, Martin County, Florida. As with the other applicants, Martin offers a full range of acute care services, as well as adult inpatient cardiac catheterization services, a non-invasive cardiology laboratory, and cardiac rehabilitation and support services for cardiac patients and their families. No significant data is, however, available on Martin's adult inpatient cardiac catheterization program since it is a new service. By its application, Martin proposes to establish an adult open heart surgery program. Currently, there are no open heart surgery programs located in the four northern counties of District IX (Martin, St. Lucie, Indian River, and Okeechobee Counties), and Martin is currently the only hospital located in those four counties that provides in-patient cardiac catheterization services. Accordingly, to access open heart surgery services within the district, residents of the northern four counties must avail themselves of the current programs existent in Palm Beach County. The protestants As heretofore noted, open heart surgery services are currently available at three facilities within District IX; Delray, JFK and Palm Beach Gardens, each of which is located in Palm Beach County. Delray is a 211-bed acute care hospital, sited in the southern portion of Palm Beach County, and located in Delray Beach, Florida. It is a comprehensive hospital providing all services normally available in an acute care facility, with the exception of obstetrics, pediatrics and radiation ontology, and is part of a larger medical campus, operated by the same parent company, that includes a 60-bed inpatient rehabilitation hospital that is physically attached to Delray, a 120-bed psychiatric hospital, and a 120-bed skilled nursing facility. In addition to its other services, Delray provides inpatient cardiac catheterization services and has, since 1986, provided adult open heart surgery services. With a recent addition, Delray has two dedicated open heart operating rooms (ORs) and one back up, as well as three separate intensive care units for coronary care, medical intensive care and surgical intensive care. For calendar year 1989 Delray reported to the local health counsel that it performed 338 open heart cases. Delray is located approximately 11 miles north of Boca, an average drive time of approximately 17 minutes. Between Delray and Boca, there is more than a 50 percent overlap in the medical staffs of the two hospitals, and almost 70 percent overlap in the areas of cardiology and internal medicine. Considering the overlap in the facilities' service areas, it is reasonable to conclude that if Boca's application is approved Delray would lose 122 open heart and 84 angioplasty cares in Boca's first year of operation and 130 open heart and 93 angioplasty cases in Boca's second year of operation. Such losses would translate into a after-tax income loss to Delray of approximately $645,000 in the first year of operation alone. Such loss of revenue and patients could adversely impact Delray's existing program. JFK is a 369-bed community hospital located in Atlantis, Florida; a small town just south of West Palm Beach. It provides a full range of medical- surgical services, with the exception of OB-GYN and nursery services, including cardiac, cancer, orthopedic, and medical/surgical intensive care and coronary care. It established its inpatient cardiac catheterization and open heart surgery program in February 1987, and currently has ten operating rooms, two of which are devoted exclusively to open heart surgery, and a 16-bed cardiac care unit (CCU), 10 beds of which are dedicated to open heart patients. For calendar year 1989, JFK reported to the local health council that it performed 262 open heart cases. As sited, JFK is located just south of West Palm Beach and within 10 miles of St. Mary's. Currently, there is an 83 percent overlap in the MDC-5 service areas (the service area closest to the open heart surgery program) of St. Mary's and JFK, and a substantial overlap between cardiologists on the staffs of both facilities. During the period of January 1988 - May 1990, 43 percent of the patients St. Mary's referred for open heart and angioplasty services were referred to JFK. Assuming St. Mary's could achieve the volumes it projected in its application, it is reasonable to assume that JFK would lose 75 open heart and 83 angioplasty cases in St. Mary's first year of operation, and 91 open heart and 100 angioplasty cases in St. Mary's second year of operation. Such lose in the first year of St. Mary's operation would translate into a net reduction of $1,200,000 in JFK's income. Such loss of revenue and patients could adversely impact JFK's existing program. Palm Beach Gardens is a 205-bed acute care hospital sited in north Palm Beach County. It provides inpatient cardiac catheterization services and has, since 1983, provided open heart surgery services. Currently, Palm Beach Gardens maintains two operating rooms dedicated to open heart surgery, and has a third operating room available for open heart surgery should the demand arise. For calendar year 1989, Palm Beach Gardens was the largest provider of open heart surgery services in the district, having reported to the local health council that it performed 491 open heart cases. Palm Beach Gardens is located approximately 10 miles south of the Palm Beach County/Martin County line or a straight line distance of approximately 25 miles south of Martin and approximately 10 miles north of St. Mary's. During the period of July 1988 - June 1989, 229 residents of St. Mary's primary service area had open heart surgery at Palm Beach Gardens, and 142 residents of Martin's primary service area obtained such services at that facility. If Martin's proposal is approved and its utilization projections realized, Palm Beach Gardens would lose approximately 84 cases in year one of Martin's operation and 101 cases in year two. Such losses in year two would translate into a $1,400,000 pretax reduction in Palm Beach Gardens' net revenues. Such reduction in revenues and patients was not, however, considering Palm Beach Garden's financial condition and open heart surgery volume, shown to have any significant adverse impact to Palm Beach Gardens, or any identifiable program within its facility. Likewise, should St. Mary's application be approved, volumes at Palm Beach Gardens would not be reduced below optimal levels, and it would not suffer any significant adverse impact to existing programs. The parties' stipulation The parties have agreed that the following facts are admitted: Boca, St. Mary's, and Martin Memorial timely filed their Letters of Intent and CON applications at issue in this proceeding. Further, the parties stipulate that the Letter of Intent complied with all statutory and rule requirements. The construction costs of $100,000 as set forth in Table 25 of St. Mary's application is a reasonable construction costs estimate for the renovation of one special procedures room to perform open heart surgery as proposed in St. Mary's schematic plans. The parties admit that adult open heart surgery services are currently available within a maximum automobile travel time of two hours under average travel conditions for at least 90 percent of HRS Service District IX's population. This stipulation is not meant to preclude other relevant evidence regarding travel times within or without District IX. All existing providers of open heart surgery in District IX are JCAHO accredited; all applicants in this proceeding are JCAHO accredited. Each of the applicants, if approved, have the ability to implement and apply circulatory assist devices such as intra-aortic balloon assist and prolonged cardiopulmonary partial bypass for adult open heart surgery. Each of the applicants, if approved, will be capable of fulfilling the requirements of an adult open heart surgery program to provide the following services: medicine, for example, cardiology, hematology, nephrology, pulmonary medicine and infectious diseases; pathology, for example, anatomical, clinical, blood bank and coagulation lab; anesthesiology, including respiratory therapy; radiology, for example, diagnostic nuclear medicine lab; neurology; adult cardiac catheterization laboratory services; non-invasive cardiographics lab, for example, electrocardiography including cardiographics lab, for example, electrocardiography including exercise stress testing, and echocardiography; intensive care; and emergency care available 24 hours per day for cardiac emergencies. This stipulation relates only to the provision of medical services, not that the applicants have sufficient capacity to provide those services in connection with an open heart surgery program. The redesignation of acute care beds from medical/surgical beds to any type of critical care unit beds, except for neonatal intensive care beds, does not require a certificate of need unless the hospital incurs a capital expenditure in excess of the capital expenditure threshold in accomplishing this redesignation. The Department's open heart surgery and methodology and the "fixed need" pool. On August 11, 1989, the Department, pursuant to Rule 10-5.008(2)(a), Florida Administrative Code, published notice of the fixed need pool for open heart surgery programs for the July 1992 planning horizon in the Florida Administrative Weekly. Pertinent to this case, such notice established a net need for zero new adult open heart surgery programs in District IX. There was, however, no publication of any fixed need pool for pediatric open heart surgery. Following publication of the fixed need pool, the Department received protests contending that its calculation of net need was erroneous. Upon review, the Department concluded that its initial calculation was in error, and on September 1, 1989, the Department published a notice of correction in the Florida Administrative Weekly, and established a new net need for one open heart surgery program in District IX. On September 5, 1989, St. Mary's challenged the Department's corrected need assessment, claiming the Department had underestimated the need in District IX for adult open heart surgery services, and on September 8, 1989, Palm Beach Gardens challenged the Department's assessment, claiming the Department had overestimated the need for open heart services in the district. These challenges were forwarded by the Department to the Division of Administrative Hearings, along with a request for the assignment of a hearing officer to conduct all necessary proceedings required under law. Pertinent to the derivation of the fixed need pool, the Department has established by rule an adult and pediatric open heart surgery methodology that must normally be satisfied before any new open heart surgery programs will be approved. That methodology, codified in Rule 10-5.011(1)(f), Florida Administrative Code, forms the premise for the Department's calculation of net need in the instant case. Pertinent to this case, Rule 10-5.011(1)(f), Florida Administrative Code, provides: 2. Departmental Goal. The Department will consider applications for open heart surgery programs in context with applicable statutory and rule criteria. The Department will not normally approve applications for new open heart surgery programs in any service area unless the conditions of Sub-paragraphs 8. and 11., below are met. * * * 8. Need Determination. The need for open heart surgery programs in a service area shall be determined by computing the pro- jected number of open heart surgical pro- cedures in the service area. The following formula shall be used in this determination: Nx = Uc X Px Where: Nx = Number of open heart procedures projected for year X; Uc = Actual use rate (number of procedures per hundred thousand popu- lation) in the service area for the 12 month period beginning 14 months prior to the Letter of Intent deadline for the batching cycle; Px = Projected population in the service area in Year X; and Year X = The year in which the proposed open heart surgery program would initiate service, but not more than two years into the future. * * * 11.a. There shall be no additional open heart surgery programs established unless: the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart surgery cases per year or 130 pediatric heart cases per year; and, the conditions specified in Sub-paragraph 5.d., above, will be met by the proposed program. No additional open heart surgery programs shall be approved which would reduce the volume of existing open heart surgery facilities below 350 open heart procedures annually for adults and 130 pediatric heart procedures annually, 75 of which are open heart. Sub-subparagraph 5d, referenced in subparagraph 11a(II), provides: Minimum Service Volume. There shall be a minimum of 200 adult open heart procedures performed annually, within 3 years after initiation of service, in any institution in which open heart surgery is performed for adults. There shall be a minimum of 100 pediatric heart operations annually, within 3 years of initiation of service, in any insti- tution in which pediatric open heart surgery is performed, of which at least 50 shall be open heart surgery. Essentially, the subject methodology contemplates that three conditions must be satisfied before an application for a new adult open heart surgery program in the district would normally be approved: (1) a calculated net numeric need under the Department's mathematical methodology; (2) a determination that "the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 open heart surgery cases per year"; and (3) a demonstration that the applicant could perform "a minimum of 200 open heart procedures (cases) annually within 3 years after service is initiated." The first two conditions are utilized by the Department to initially establish the fixed need pool for open heart surgery services. The third condition is, by rule, related to an applicant's ability to provide quality care, and will be discussed infra. As a threshold for calculating need, and the fixed need pool, the Department's mathematical need methodology contains the formula for deriving the gross number of open heart surgical cases anticipated two years into the future. This methodology is based on the actual use rate in the district for the 12- month period beginning 14 months prior to the letter of intent deadline for the batching cycle. The number of cases is then divided by 350, which is consistent with the minimum service volume mandates of subparagraph 11 of the rule, to derive an actual gross need for open heart surgery programs at the horizon year. Existing and approved programs are then substracted to determine if there is a net need for a new open heart surgery program. While there was some dispute among the parties as to what the appropriate underlying data was to drive the Department's numerical need methodology, the parties agreed and the proof demonstrated a fractional need greater than .5, under the formula. 1/ The second step in establishing a need for open heart surgery programs, and the fixed need pool, is a determination, as required by subparagraph 11(2)I of the rule, of whether "each existing and approved open heart surgery program within the service areas is operating at and is expected to continue to operate at 350 adult open heart surgery cases per year." Here, based on the data available to the Department when it established the fixed need pool, the three existing providers had operated at the following case levels for the preceding year: Palm Beach Gardens - 494 cases; Delray - 328 cases; and JFK - 275 cases. Consequently two of the three existing providers were not operating at 350 cases per year. 2/ Based on the foregoing data, the Department initially published a net need for zero new open heart surgery programs in District IX. However, following the receipt of protests to the fixed need pool it had established, the Department, based on the same data, concluded its initial decision was erroneous, and published a notice of correction which established a net need for one new open heart surgery program in the district. This decision was timely challenged. The Department's ultimate decision to publish a need for one new program was based on two factors. First, the Department had historically rounded the numerical need up where fractional need, as calculated by its methodology, was .5 or higher. Second, although of questionable validity at the time, the Department had for several years "interpreted" the 350 case level, referred to in subparagraph (11) of the rule, to require that the average of the existing programs be at 350 before a new program would be approved, as opposed to the literal rule requirement that "each existing and approved open heart surgery program ... [be] ... operating at ... a minimum of 350 adult open heart surgery cases per year." Accordingly, with differing views then pending in the Department, it elected to recalculate the utilization level by applying the averaging approach, as opposed to applying the rule as written which it had done in initially determining zero need, and therefore published a corrected need for one new program. On January 23, 1990, the Department issued final orders in three cases, each of which involved CON applications for open heart surgery services filed in the September 1988 batching cycle, Hillsborough County Hospital Authority v. Department of Health and Rehabilitative Services, 12 FALR 785 (1990), Humana of Florida, Inc. v. Department of Health and Rehabilitative Services, 12 FALR 823 (1990), and Mease Health Care v. Department of Health and Rehabilitative Services, 12 FALR 853 (1990). In each final order the Department's Secretary stated, with regard to the Department's averaging interpretation, that: I conclude that the rule should be applied as written and that numeric need should be found only where each existing and approved open heart surgery program within the service district is operating at a minimum level of 350 open heart cases per year .... I am not unmindful that the conclusion reached here departs from an established practice of interpreting subparagraph 11 of the need rule by averaging the number of cases done by the existing providers and finding subparagraph 11 to be satisfied if the average was 350 cases or more. As previously stated, I am now satisfied that application of the rule as written is more consistent with sound health planning .... Consequently, the averaging practice that resulted in the Department's corrected notice of need for the September 1989 batching cycle at issue in this case was specifically rejected by the Department as being contrary to the rule as written before it published its notice of intent to grant Boca's application. Even though the corrected need published by the Department was erroneous, as being derived contrary to the express language of the rule methodology, the Department and the applicants contend that such error is not subject to correction in this case because of the Department's fixed need pool rule and the Department's incipient policy regarding when it will correct errors in a fixed need pool that has already been published. Such contentions are, however, unpersuasive as a matter of law, discussed infra, and as not supported by any compelling proof. The Department's fixed need pool rule, codified at Rule 10- 5.008(2)(a), Florida Administrative Code, provides: Publication of Fixed Need Pools. The depart- ment shall publish in the Florida Administra- tive Weekly, at least 15 days prior to the letter of intent deadline for a particular batching cycle the fixed need pools for the applicable planning horizon specified for each service ... These batching cycle specific fixed need pools shall not be changed or adjusted in the future regardless of any future changes in need methodologies, popu- lation estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied. In this case there has been no change in the Department's need methodology that leads to a different projection of need, as proscribed by the fixed need pool, but, rather, an identified failure of the Department to properly apply its rule when it assessed need. While the Department may have consistently misapplied its rule in the past, such consistency does not cloth it past action with any propriety where, as here, such action is properly challenged or, stated differently, because the rule was misapplied in the past does not lead to the conclusion that its proper application constitutes a change in need methodologies. Accordingly, it is found that the fixed need pool rule does not, under the circumstances of this case, preclude correction of the need established through the Department's publication of its notice of correction. 3/ The Department and the applicants also contend that the Department's policy on how it will treat corrections to a fixed need pool that has already been published, and errors in a published fixed need pool which are discovered after the cycle has begun, precludes any correction of the need published for this batching cycle. Pertinent to this point, the Department points to its policy, which was published in the Florida Administrative Weekly contemporaneously with its initial assessment of zero need, that provides: Any person who identifies any error in the fixed need pool numbers must advise the agency of the error within ten (10) days of publica- tion of the number. If the agency concurs in the error, the fixed need pool number will be adjusted prior to or during the grace period for this cycle. Failure to notify the agency of the error during this ten day period will result in no adjustment to the fixed need pool number for this cycle and a waiver of the person's right to raise the error at subsequent proceedings. Any other adjustments will be made in the first cycle subsequent to identification of the error including those errors identified through administrative hearings or final judicial review. Any person whose substantial interest is affected by this action and who timely advised the agency of any error in the action has a right to request an administrative hearing pursuant to Section 120.57, Florida Statutes. In order to request a proceeding under Section 120.57, Florida Statutes, your request for an administrative hearing must state with specifi- city which issues of material fact or law are in dispute. All requests for hearings shall be made to the Department of Health and Rehab- ilitative Services and must be filed with the agency clerk at 1323 Winewood Blvd. Building 1, Room 407, Tallahassee, Florida 32301. All requests for hearings must be filed with the agency clerk within 30 days of this publication or the right to a hearing is waived. According to the Department, its policy is to correct computational errors in the fixed need pool only if they are brought to its attention during the grace period which is triggered by the filing of a letter of intent, and if there is sufficient time to publish a corrected fixed need pool prior to the CON application deadline so that all potential competing providers will have notice of the changes. Errors brought to the Department's attention after the grace period will only be considered in the development of the subsequent batching cycle's fixed need pool, regardless of the nature or magnitude of the error. Errors brought to the Department's attention during the grace period, but not reviewed by the Department until after the grace period would only be corrected for subsequent batches. Errors identified in administrative hearings or upon judicial review, even though predicated upon a timely notice of error to the Department, would be corrected in subsequent batches, but not for the batch in which the error occurred. The Department's enunciated rational for the foregoing policy is to instill "predictability" in the CON process, which it suggests promotes competition and affords the Department an opportunity to select from a broader field the best qualified applicants to "meet the need." Such rationale lacks, however, any reasonable basis in fact where, as here, there is no need to be met, and affronts sound health planning principles. The 350 minimum procedure level established for existing providers, before a new program can be approved, is an important threshold bearing on quality of care. In this regard, it has been demonstrated that there is a direct relationship between volume of procedures and mortality, with better results being obtained at facilities operating at a minimum level of 200-350 procedures annually. Accordingly, precision in assessing the need for new open heart surgery programs is crucial to assure that any new program could reasonably be expected to achieve a sufficient level of service, and to assure that the level of service provided by existing facilities would not fall below the optimum threshold. The Department's policy ignores this relationship, would recognize a need where none exists and thereby adversely impact existing programs, and would impinge on future planning horizons. As importantly, the Department's policy would supplant its own rule methodology for calculating need, and render illusory any decision based on a balanced review of statutory criteria. Accordingly, it is concluded that the Department has failed to explicate its policy choice in the instant case, and that numeric need under the Department's methodology is a viable issue in these proceedings. The need for the services being proposed in relationship to the district plan and state health plan. Applicable to this case is the 1989 Florida State Health Plan, which contains the following preferences to be considered in comparing applications for open heart surgery programs: Preference shall be given to applicants estab- lishing new open heart surgery programs in larger counties in which the percentage of elderly is higher than the statewide average and the total population exceeds 100,000. Preference for new open heart surgery programs shall be given to applicants clearly demonstra- ting an ability to perform more than 350 adult procedures annually within three years of initiating the program. Quality of care has been demonstrated to be directly related to volume; thus, facilities are expected to perform a minimum of 350 adult procedures annually. Preference shall be given to applicants who will improve access to open heart surgery for persons who are currently seeking the service outside of their HRS district. This will improve accessibility and reduce travel time for the residents in the district. Preference shall be given to an applicant with a history of providing a disproportionate share of charity care and Medicaid patient days in the respective acute care subdistrict. Qualifying hospitals shall meet Medicaid disproportionate share hospital criteria. Priority should be given to an applicant who provides services to all persons, regardless of their ability to pay. Preference shall be given to an applicant that can offer a service at the least expense yet maintain high quality of care standards. The physical plant of larger facilities can usually accommodate the required operating and recovery room specifications with lower capital expendi- tures than smaller facilities. Larger facilities also have a greater pool of the specialized personnel needed for open heart surgical procedures. Preference shall be given to an applicant that performs percutaneous transluminal angioplasty, streptokinase, or other innovative techniques as alternatives to surgery for low-risk patients. The applicant shall include in its application a protocol regarding the selection of patients for surgery or alternative non-surgical therapeutic cardiac procedures. All three applications are reasonably consistent with the state health plan's preference for establishing open heart surgery programs in counties in which the percentage of elderly is higher than the statewide average and the total population exceeds 100,000. In 1989, Palm Beach County had a population of 873,347, 23.4 percent of which were age 65 and over, which was higher than the statewide average of 17.9 percent. The next most populous counties in the district fell within Martin's primary service area, and were St. Lucie County, with a population of 142,440, 18.3 percent of which were age 65 and over, and Martin County, with a population of 96,336, 25.1 percent of which were age 65 and over. In all, the northern four counties had a population of 360,644, 21.2 percent of which were age 65 and over. The state health plan also accords a preference to applicants who clearly demonstrate an ability to perform more than 350 adult procedures within three years of initiating the program. Of the three applicants, Boca is in the best position to achieve the preference based on the number of diagnostic cardiac caths performed at this facility, and the number of patients it has referred for open heart surgery. Comparatively, Martin and St. Mary's are unlikely to achieve such level of service within three years of initiating a program. The third objective of the state health plan accords a preference for the applicant that will more clearly improve access to open heart surgery for persons who are currently seeking the service outside the district. Currently, while there is no access problem in the district, it is apparent that many district residents leave the district for open heart surgery. During the period of July 1988 - June 1989, open heart procedures were performed on 782 people residing in Boca's primary service area. Of those, 316 received treatment in a District IX facility, 383 received treatment in a District X (Broward County) facility, and the balance received treatment elsewhere, but predominately in Dade County (District XI). While there was a substantial outmigration from Boca's primary service area for open heart services, the vast majority of such outmigration, 325 people, was serviced at North Ridge, a mere fifteen mile/nineteen minute trip from the Boca area. With regard to St. Mary's primary service area, the proof demonstrated that during the same period 566 people sought open heart services, with 455 of those people receiving treatment within District IX. Of the 111 who sought service outside the district, 41 received treatment in Broward County and 61 received treatment in Dade County. Finally, with regard to Martin's primary service area, 316 people sought open heart services, with 148 of those people receiving treatment within the district. Of the 168 who sought service outside the district, 90 received treatment in Broward County, 29 in District VII hospitals, and 39 in Dade County. As heretofore noted, access is not a problem within District IX. However, to the extent this preference seeks to address the issue of outmigration, the proof demonstrates that Martin is the superior applicant. Clearly, the 15 mile/19 minute trip from the Boca area to North Ridge is not a barrier to access, and the number of people from St. Mary's primary service area seeking services outside the district are small in comparison to the other applicants. The residents of Martin's primary service area who seek treatment outside the district are, however, disproportionately large when one considers the aggregate travel time they incur when accessing services in the Orlando or Melbourn areas, or Dade and Broward Counties. The fourth objective of the state health plan accords a preference for the applicant with a history of providing a disproportionate share of charity care and Medicaid patient days in the district. Among the applicants, St. Mary's is the only disproportionate share provider and provides the largest number of Medicaid patient days in the district. As between Boca and Martin, the proof demonstrates that Martin is more committed to, and has historically been a greater provider of, care to the medically indigent. The fifth objective of the state health plan accords a preference to the applicant that can offer a service at the least expense yet maintain high quality of care standards. Here, each of the applicants are large facilities, with demonstrated commitments to maintaining high quality of care standards. Martin has, however, demonstrated that it can offer the proposed service at the least expense. 4/ The last objective of the state health plan accords a preference to the applicant that will perform percutaneous transluminal angioplasty, strepokinase, or other innovative techniques as alternatives to surgery. Here, all applicants propose to offer such services. District IX's 1988 Health Plan was in effect at the time the CON applications were at issue in this case were filed; however, that plan had not been adopted as a rule. Accordingly, such plan is not pertinent to this proceeding. Venice Hospital, Inc. v. Department of Health and Rehabilitative Services, Case Nos. 90-2383R, et seg., (DOAH 1990). The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services in the district. Open heart surgery is a specialized, tertiary health care service. A tertiary health service is defined by Section 381.702(20), Florida Statutes, as: ... a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost-effectiveness of such service.... As a tertiary service, planning for open heart surgery services is done on a regional basis and concentrated in a limited number of hospitals to insure the quality, availability and cost effectiveness of the program. Essentially, the concept of regionalization creates a distinction between hospitals; some hospitals offer routine acute care services, while special high risk services are concentrated in a limited number of hospitals. Encompassed within such concept is the expectation that patients will be transferred from one facility to another to obtain tertiary care services. As a touchstone for assessing need within a service district, the Department has adopted the open heart surgery need methodology, discussed supra, that must normally be satisfied before a new open heart surgery program will be approved. Under that methodology, further need for adult open heart surgery programs is determined based on the projected increase in the number of open heart surgery procedures two years into the future and the open heart surgery volume of existing providers. The rule provides that, regardless of the projected growth in the number of open heart procedures, no additional adult open heart programs are granted unless each existing adult open heart program performs a minimum of 350 procedures annually. Application of the rule methodology to the facts of this case projects a growth in the projected number of open heart procedures sufficient to support a fractional need greater than .5, which the Department reasonably rounded to 1. However, two of the existing three providers were not performing a minimum of 350 procedures annually. Therefore, there is no need under the Department's methodology for a new open heart surgery program in District IX. While no need under the Department's methodology, the applicants have advanced several factors which they contend reflect negatively on the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization or adequacy of existing open heart programs in the district, and which they suggest warrant a finding of need based on special or not normal circumstances. Foremost among the factors pressed by the applicants as indicitive of an abnormal circumstance is the high number of District IX residents who seek open heart surgery services outside the district; referred to in this case as outmigration. Outmigration is, however, simply an observation of patient flow patterns and does not, in and of itself, constitute an abnormal circumstance that would demonstrate need in the district. Rather, to demonstrate a not normal circumstance, such outmigration must be demonstrated to be a consequence of some failing of existing programs, i.e., accessibility or quality of care, to be pertinent to any abnormal need assessment. 5/ In this case, there is no such failing in the existing programs. The three existing adult open heart surgery programs in the district are currently available to 90 percent of the population of the district within a maximum automobile travel time of two hours. Under such circumstances there is no geographic access problem within the district. Moreover, only Martin would actually enhance accessibility, were it a problem, because the residents of the four northern counties it proposes to serve must currently travel to Palm Beach County to access services within the district. In contrast, Boca is within approximately 30 minutes travel time of two existing providers in the district and an additional provider in District X. Likewise, St. Mary's is located less than 10 miles from two of the existing providers in the district. As with geographic access, there is likewise no economic access problem in the district. While the Medicaid use rate within the district for calendar year 1989 was .1 percent, well below the statewide average of approximately 2 percent, such raw statistic does not demonstrate that there is a Medicaid access problem in the district. To persuasively demonstrate such fact from use statistics would require a demonstration that Palm Beach County's use rate was significantly lower than counties with similar demographics. Here, there was no such showing. Moreover, St. Mary's, the largest provider of Medicaid services in the district, was only shown to have transferred three Medicaid patients for open heart or angioplasty services from January 1988, through May 1990. Finally, each of the existing providers have contracted with the Palm Beach County Health Care District to provide care to indigent patients, and have not refused service to anyone regardless of their ability to pay. Accordingly, it is concluded that there is no economic access problem within the district. With two of the three existing providers operating below 350 procedures when this cycle commenced, there is clearly excess capacity within the district when one considers the fact that a single operating room has the capacity to handle at least 500 cases annually. In reaching this conclusion, the applicants' assertion that delays may have been encountered in gaining admission to some facilities during the season because of a lack of critical care beds has not been overlooked. However, any such delays were not reasonably quantified in terms of number or duration, and were not shown to be significant. As importantly, existing facilities have increased their critical care bed capacity, and can increase it further by merely redesignating acute care beds from medical/surgical beds to any type of critical care beds needed as the exigency arises. Although two of the three existing providers offer relatively new programs, the proof is compelling that each provides a quality surgical and post surgical open heart surgery program, appropriately staffed, and that there is no want of quality care within the district. The use of agency nurses, as suggested by one applicant, was not persuasively demonstrated to reflect adversely on quality of care. Succinctly, simply because one is an agency nurse does not suggest substandard performance, and the use of agency nurses, as needed, to staff a facility does not, of itself, aversely impact patient care. Here, the staffs of existing facilities are appropriately trained and supervised, and offer their patients a quality program. While there is certainly a significant outmigration from the district for open heart surgery services, such outmigration was not shown to be related to any infirmity in existing programs. Rather, such outmigration is most reasonably attributable to physicians' established referral patterns or patient preference. 6/ Finally, regarding special circumstances, St. Mary's suggests that its designation as a trauma center and the lack of pediatric open heart services to 90 percent of the population within a maximum automobile travel time of two hours warrant approval of its application. Such suggestions are, however, not supported by compelling proof. While it is true that St. Mary's has been selected by the Palm Beach County Health Care District, along with Delray, for designation as a Level II trauma center, such designation has not been contractually finalized and St. Mary's has not applied for such designation with the Department. As importantly, on October 1, 1990, a new law regarding trauma centers became effective which will reopen the county trauma center designation process, and require facilities to be designated by the state as trauma centers. Under such circumstances, it is speculative whether St. Mary's will become a trauma center, and until such event actually occurs such factor is not significant to these proceedings. St. Mary's quest for a pediatric open heart surgery program is premised on special circumstances, not numeric need, and finds it basis on the fact that no pediatric open heart surgery program exists in the district and that such pediatric services are not available to 90 percent of the population within two hours travel time. While such may be the case, St. Mary's application, on balance, fails to support such an award for a number of reasons. First, St. Mary's application projects that it will perform 10 pediatric open heart surgery cases in its first year of operation, and 20 in its second year of operation. It contains no projection for the third year of operation, but St. Mary's consultant, Michael Schwartz, opined that St. Mary's would perform 50 pediatric open heart surgery cases by the third year based on his belief that St. Mary's would capture 80 to 100 percent of the potential pediatric referrals from District IX and the northern portion of District X. Mr. Schwartz's opinions are not, however, credible. During the period July 1, 1988 to June 30, 1989, there were 40 pediatric open heart surgery cases performed on patients residing throughout District IX, with 22 receiving treatment at Jackson Memorial (Dade County), 14 at Miami Children's Hospital, and 4 at Shands in Gainesville. During the same period, there were 24 open heart pediatric patients in northern District X, an area equi-distant in travel time from the Miami facilities and St. Mary's, with 15 receiving treatment at Jackson Memorial, 8 at Miami Children's Hospital and 1 at Shands. Each of these facilities are either teaching hospitals or specialty pediatric hospitals, are among the top four facilities in the state that perform over 100 pediatric open heart surgery cases each year, and each enjoys an excellent reputation for providing quality pediatric care. Given existent referral patterns and the quality of existing pediatric programs, it is improbable that St. Mary's could reach its projected utilization for years one and two, much less attain a level of 50 pediatric open heart surgery cases during its third year of operation. In 1994, the third year of St. Mary's program, there would be approximately 53 pediatric open heart surgery cases performed on patients residing throughout District IX. To attain a level of 50 cases in its third year, St. Mary's would have to attract almost 100 percent of all cases arising within the district, an improbable occurrence. Equally improbable is St. Mary's ability to penetrate the pediatric open heart surgery market in northern Broward County, an area defined by Mr. Schwartz as being equi-distant in travel time from the Miami facilities and St. Mary's, given existent referral patterns and physicians' satisfaction with existing programs. In sum, the proof demonstrates that St. Mary's could not reasonably be expected to perform 50 pediatric open heart surgery cases within three years of initiating service. In addition to its inability to generate sufficient volume to maintain service quality in a pediatric open heart surgery program, St. Mary's also lacks a pediatric cardiac cath program which is required of any facility proposing pediatric open heart surgery services. Notably, with regard to pediatric cardiac services, Rule 10-5.011(1)(e), which relates to cardiac catheterization services, and Rule 10-5.011(1)(f), which relates to open heart services, are mutually dependent. The cardiac catheterization rule, as it relates to pediatrics, provides: 6. Coordination of Services. * * * Pediatric cardiac catheterization programs must be located in a hospital in which pediatric open heart surgery is being performed. * * * 8. Need Determination. * * * f. Pediatric cardiac catheterization programs shall be established on a regional basis. A new pediatric cardiac catheterization program shall not normally be approved unless the numbers of live births in the service planning area, minus the number of existing and approved programs multiplied by 30,000, is at or exceeds 30,000. (Emphasis added) Also pertinent to this issue, the open heart surgery rule provides: 3. Service Availability. * * * c. The following services must be provided in the health care facility within which the open heart surgery program is located and must be capable of fulfilling the requirements of an open heart surgery program: * * * (VI) Cardiac catheterization laboratory.... The Department reasonably interprets the foregoing provisions as mandating that a pediatric cardiac catheterization program or pediatric open heart surgery program may not be approved independent of the other but, rather, they must coexist. Since the proof is clear that St. Mary's only operates and is only approved by the Department to operate an adult cardiac cath program, and it has not applied for a pediatric cardiac cath program, its proposal is deficient. 7/ In view of the foregoing, it is concluded that, while pediatric open heart services are not currently available within District IX and are not available to 90 percent of the population within two hours travel time, that St. Mary's application to initiate such services should be denied. It is further found that the provisions of the open heart surgery rule relating to the two- hour access standard, which does not specifically state whether such standard applies to adult, pediatric or both, is not applicable to pediatrics. Rather, the Department interprets such rule provision to apply only to adult programs, because such standard is not necessarily pertinent to pediatric open heart surgery since it is more specialized or tertiary in nature than adult open heart surgery programs. Given the close relationship between the cardiac cath rule and the open heart surgery rule, the Department's position is reasonable. In this regard, the cardiac cath rule establishes a travel standard for adult programs, but not pediatric. Rather, it provides for establishment of such programs on a "regional basis," and provides that a new pediatric cardiac cath program should not normally be approved unless the number of live births exceeds 30,000. Here, there were only 16,500 live births in District IX in 1988, a number that is insufficient to warrant a pediatric cardiac cath program. Given such fact, and the relationship between the two rules, the Department's interpretation is reasonable and the two-hour travel time standard does not apply to pediatric open heart surgery. Finally, as to adult open heart surgery services, it is concluded that there exist no special circumstances within the district that would warrant approval of a new open heart surgery program, and that existing facilities are providing appropriate quality care that is accessible to all residents of the district regardless of their ability to pay. The ability of the applicant to provide quality of care and the applicant's record of providing quality of care. Each of the applicants in this case has established an excellent record for providing quality care to their patients, and would be generally expected to provide high quality care for open heart surgery patients notwithstanding some failings in their applications. During the course of the proceeding, some protestants contended that because an applicant failed to detail some particular item of equipment essential to an open heart program, that such failing reflected adversely on their ability to provide quality care. While such could be the case in the abstract, it does not, where, as here, the applicants have sound records, with a demonstrated ability to attract quality personnel to staff their programs. Such failings are, however, germane to the feasibility of the applicant's proposals, discussed infra. Other failings pointed to by the protestants, included: St. Mary's proposal to utilize a call team composed of nurses who customarily assist at thoracic surgery and to recover its open heart patients in a mixed intensive care unit; St. Mary's inability to achieve a 200 and 350 case level per year; Martin's inability to achieve a 350 case level per year; and Martin's failure to document in its application the manner in which it could rapidly mobilize an open heart surgery team 24-hours a day, or how it would treat emergency patients within a two-hour period. Again, considering the quality of the applicants, and the quality personnel they will attract, as well as the parties' stipulation, these failings are minor and do not reflect adversely on their proposals with but one exception. 8/ The only significant factor presented that could bear on an applicant's ability to provide quality care is its ability to achieve optimal utilization levels. In this regard, it has been demonstrated that a relationship exists between the volume of open heart surgical procedures performed at a hospital and the quality of care rendered at those facilities, as measured by patient outcomes. Overall, facilities performing more than 350 cases per year experienced the lowest in-hospital death rate, with those performing more than 200 cases per year being next in line. Pertinent to this issue, the Department has adopted Rule 10-5.011(f)5, Florida Administrative Code, which addresses service quality for open heart surgery programs. That rule, as heretofore noted under the findings related to the Department's need methodology, requires that a minimum of 200 adult open heart surgery cases be performed annually within 3 years of initiating the service, and that at least 50 pediatric open heart surgery cases be performed within 3 years of initiating such service. Here, St. Mary's has failed to demonstrate that it can achieve such level of utilization, and its ability to offer a quality program is therefore suspect. As importantly, Rule 10- 5.011(f)11.a.(II) precludes the approval of St. Mary's application under such circumstances. Boca and Martin could reasonably expect to perform at least 200 cases within 3 years. The need in the service district of the applicant for special equipment and services which are not reasonably and economically accessible in adjoining areas, and the needs and circumstances of those entities which provide a substantial portion of their services or resources to individuals not residing in the service district in which the entities are located. As heretofore noted, North Ridge is located in northern Broward County, a mere 15 mile/19 minute drive time from Boca. North Ridge is a 395-bed hospital that provides all services with the exception of obstetric and radiation therapy, and has for 15 years provided open heart surgery services. It currently has two cardiac catheterization laboratories, and two dedicated and two backup open heart operating rooms. At an average of 750 cases per year, over the last few years, North Ridge has additional capacity, and could comfortably accommodate 1,000 cases per year. North Ridge's primary service area is, and has been for sometime, northern Broward County and southern Palm Beach County, although prior to the initiation of other services in Palm Beach County it serviced the entire area. North Ridge markets extensively in southern Palm Beach County, has follow-up activities for its Palm Beach County residents, and has strong ties with the physician community in southern Palm Beach County. Accordingly, North Ridge has an established presence in southern Palm Beach County, with approximately 30-40 percent of its patients coming from that area. North Ridge's mortality statistics, along with its utilization and reputation, mark it as an excellent facility with a quality open heart surgery program. Moreover, its charges for open heart surgery services are significantly below those of Palm Beach County facilities, as well as those proposed by Boca. North Ridge's location makes it easily accessible to the patients of southern Palm Beach County, and physicians have not experienced any significant problems gaining access to that facility. Moreover, Boca's patients have been accorded first priority at North Ridge. With new technology and the development of various drug therapies, it is extremely rare for a patient to have such an urgent need for open heart surgery that transportation becomes a significant issue. When urgently needed, North Ridge, as well as Delray, can adequately serve the needs of southern Palm Beach County. In sum, there is a viable alternative for residents of southern Palm Beach County to Boca's application, and that is their continued referral to North Ridge. That program is easily accessible, reasonably priced, and historically sound. On the other hand, to approve Boca's application would significantly adversely impact North Ridge, since their service areas in southern Palm Beach County and northern Broward County overlap in most material respects. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operations. Each applicant has demonstrated that it either has or can obtain all resources, including health manpower, management personnel and funds for capital and operating expenditures. Boca and Martin each have the funds on hand for project accomplishment, and St. Mary's has demonstrated its ability to acquire such funds through donations, as needed, for project accomplishment. Each applicant is a quality provider of acute care services, and has demonstrated through its existing programs its ability to attract and retain appropriate management and health manpower for project accomplishment, notwithstanding the current nursing shortage being experienced locally and nationally. Accordingly, while the cost of skilled personnel to staff their open heart surgery programs may exceed their initial estimates in some cases, any of the applicants should be able to appropriately staff their program through the use of existing staff, national or local recruitment, or a combination thereof. While each applicant has adequate resources, the viability of Boca's application has been challenged based on its failure to provide a complete list of all capital projects in its application, as required by Section 381.707(2)(a), Florida Statutes. In this regard, the proof demonstrates that the only item listed in its application was for an "expansion/upgrade" of the physical plant at a proposed cost of $6.2 million. That information was an accurate financial description of that project at the time, but did not include other items relating to other construction and equipment purchases to which Boca was committed. In this regard, as of September 1989, Boca had committed itself to an additional $1,261,400 for projects relating to its 1989 fiscal year and $1,380,039 for projects relating to its 1990 fiscal year, for a total of $2,641,439. All of these items will be capitalized by Boca, and it could have provided a list or summary of such projects at the time of filing its application in September 1989. Boca's failure to do so, failed to comply with section 381.707(2)(a), and prevented the Department from having a complete picture of Boca's financial resources to complete the project. The extent to which the proposed services will be accessible to all residents of the service district, and the applicant's past and proposed provision of health care service to Medicaid patients and the medically indigent. Of the proposed programs, only those advanced by St. Mary's and Martin would be reasonably accessible to all residents of the service district. In this regard, the geography and population densities of the district demonstrate that Palm Beach County, at 1,993 square miles, is the single most populous county in the district, with a 1989 population of 873,347. The northern four counties are geographically larger than Palm Beach County, at 2,404 square miles, and contained a 1989 population of 360,664, nearly one-third of the total population of the district. The most dense population in the northern four counties is the Martin County/Port St. Lucie area. The district itself measures 100 miles in length, north to south, in a straight line. Martin is located approximately 60 miles from the southern boarder of the district, St. Mary's is approximately 30 miles, and Boca is 2.1 miles Considering Boca's geographic location, it would not be readily accessible to all residents of the district. Martin and St. Mary's are, on the other hand, sited such that they could, geographically, address the needs of the district as a whole. However, St. Mary's, like Boca, is proximate to a number of open heart surgery providers and would not improve geographic accessibility within the district, as would Martin. Further bearing on the issue of accessibility, is the applicants' commitment to service Medicaid and the medically indigent. In this regard, the proof demonstrates that Boca has not been an historic provider of Medicaid or indigent care, and for its fiscal 1989 dedicated less than 1 percent of its total admissions to Medicaid and indigent care. On the other hand, St. Mary's patient mix has included 15 percent Medicaid and 5 percent indigent, and it is the highest Medicaid provider in the district. Martin has, although to a lesser degree than St. Mary's, also demonstrated a commitment to the underserved by historically serving 5 1/2 percent Medicaid and indigent patients. In its application, Boca "committed" to provide at least 2 percent of gross revenue generated by the open heart surgery program for the provision of charity or indigent care on an annual basis. Considering Boca's nominal historic commitment to indigent care, its location in an affluent area of Palm Beach County, and its closed staff, Boca could not reasonably achieve such level of care, and would not increase accessibility for underserved groups. Comparatively, St. Mary's and, to a lesser extent, Martin, would increase accessibility for underserved groups should the need exist. Here, St. Mary's has projected that 7 percent of its total patient days will be devoted to Medicaid patients and 3 percent to indigent patients, and Martin has projected 5 percent Medicaid and indigent. The costs and methods of the proposed construction. In its application, Boca estimated a total project cost of $7,499,856 to construct and equip a new addition to house its open heart surgery program. That figure included a $6,147,900 construction fund and $783,056 for equipment costs to complete the two operating suites, recovery areas and ten-bed surgical intensive care unit proposed. Its estimates were, however, deficient. Boca's equipment budget, as it appeared in its application, was prepared by an individual who had no expertise in this area, and was deficient in terms of the actual equipment listed and its cost. To properly equip and furnish the two operating room suites, recovery room areas and a ten-bed surgical intensive care unit proposed by Boca would require an expenditure in excess of $1,690,000. Adding necessary instrumentation and a backup pump could add an additional $50-60,000. At hearing, Boca sought to minimize the significance of its underestimation by offering the testimony of an expert in medical equipment planning, cost estimating and procurement. That expert, Richard Drinkwine, was most credible and found, upon review of the Boca proposal that it was wanting in both equipment and cost. In his opinion a more reasonable cost to purchase moverable equipment would be $1,027,267, and a reasonable estimate for the furniture needs of Boca would be $92,257. This estimate was based on the assumption that Boca would not initially equip its second operating room, exam rooms or recovery rooms. To do so, would add an additional cost of $411,329 (movable and fixed equipment) for the second operating room and $160,000 to equip the recovery areas. Adding needed instrumentation and a back up pump would bring Boca's equipment costs to over $1,740,000. 9/ While Boca underestimated its equipment costs, the proof demonstrates that its construction estimate of $6,147,900 was overstated. The major factor which accounts for the overstatement by Boca in its application was an over estimate of the cost to construct the first floor of its addition, which is a covered parking area. In fact, Boca will be able to construct its proposed addition for approximately $5,226,397, or $921,503 less than it estimated in its application. Although Boca could realize a significant savings on construction costs, and those savings would be adequate to almost offset the deficiencies in its equipment budget, the restructuring of its application at this time is not appropriate under the Department's Rule 10-5.010(2)(b). Notably, while the total cost figures might be the same, the additional equipment that is needed to equip Boca's program, and that was omitted from its application, is significant. In addition to Boca's failure to demonstrate the reasonableness of its cost proposal, it is also found that Boca's proposal is oversized and overpriced to meet any demands Boca could reasonably expect to fulfill at any time in the foreseeable future. First, each of the two operating rooms proposed by Boca are over 1,100 square feet in size. Such size is more than twice the size reasonably needed to accommodate open heart surgery. Second, areas in the central core and lounges are also larger then needed. More significantly, Boca is proposing a four-bed recovery area and ten dedicated SICU beds. Even assuming there is a need for an additional open heart surgery program in the district, Boca could never reasonably expect to capture sufficient market share to justify the capital expenditure necessary to warrant a 10-bed SICU. Ten SICU beds could handle between 900 and 1400 open heart patients in a year. There are no programs anywhere in South Florida, no matter how mature or well respected, that have achieved utilization close to that level, and it is not reasonable for Boca to expect to achieve such volumes. Significantly, a portion of the capital cost for Boca's project would, under the present system, be passed along to the federal government by the capital cost pass through. By this mechanism, over $3,500,000 of Boca's project would ultimately be reimbursed to the hospital in the form of Medicare payments. Compared to Boca's cost proposal, St. Mary's is modest. Here, the schematics submitted by St. Mary's with its application and omissions response depict the existing surgical suites at St. Mary's and the minor renovations necessary to convert an existing room into the proposed open heart surgery suite. As proposed, St. Mary's program would have a dedicated open heart surgery suite, as well as a backup operating room. Recovery would be accommodated in its existing 16-bed ICU. In its application, St. Mary's estimated a maximum project cost of $850,000 to remodel its existing facility and equip its proposed open heart surgery program. That figure included up to $100,000 for remodeling costs, and up to $700,000 for equipment costs. St. Mary's estimates are reasonable and cost effective whether its program is dedicated to adult and pediatric open heart surgery service or simply adult services. Significantly, the equipment needed to perform open heart surgery on adults and pediatrics is the same except for some special instruments. That cost, at less than $25,000, is nominal and does not affect the reasonableness of St. Mary's estimates. As proposed in its application, Martin would construct 2,800 square feet of new space at its facility for the purpose of implementing an open heart surgery program. The location of the project is the hospital's first floor adjacent to both the cardiac catheterization laboratory and the existing surgical suites. This location will provide rapid access for cardiac catheterization emergencies requiring open heart intervention and will share common areas with the existing surgical suites, minimizing additional construction and project cost. It is also proximate to a 9-bed surgical intensive care unit. Of the eight existing operating rooms at Martin, two are large enough to serve as backup open heart operating rooms in the event of an emergency, but Martin has not proposed to establish, or budgeted the necessary equipment to establish, a backup operating room. Martin, like St. Mary's, proposes a modest expenditure, compared to Boca, for the initiation of its open heart surgery program. In this regard, Martin's application estimates its total project cost at $1,239,029. That figure includes a total construction cost budget of $796,669, and an equipment budget at $375,360. Martin's costs and methods of proposed construction are reasonable. While the proof demonstrates that approximately $411,000 is a reasonable cost to equip an open heart surgery suite, it also demonstrated that Martin currently has on hand some necessary equipment, such as cell-savers and heating-cooling machines. Under such circumstances, Martin could reasonably equip its program within its $375,360 budget. It could not, however, equip a backup operating room within such budget, and without a backup operating room could not reasonably expect to be able to handle 500 open heart cases a year, as required by rule 10-5.011(f)3d, given the need to back up its cardiac cath program. The immediate and long-term financial feasibility of the proposal. To assess the financial feasibility of the project, Boca's pro forma of income and expense, contained within its application, projects 192 patients during the first year of operation of its open heart surgery program and 211 patients during the second year. Projected charges for both years are based on $55,430 for DRG 104 and $41,942 for DRG 106 with an average length of stay of 10 days. Payor class mix is estimated to be as follows: Medicare 70 percent, Medicaid 0 percent (nominal), insurance 25 percent, other 3 percent, and indigent 2 percent. Net revenue over expenses for year one is projected to be $1,303,312, and for year two to be $1,597,959. Boca's proposed charges, utilization levels, and payor mix are reasonable. However, its pro forma contained unreasonable assumptions regarding average length of stay, total deductions and expenses. 10/ At hearing, Boca made no effort to defend the unreasonable assumptions it had presented to the Department through the pro forma contained in its application. Rather, conceding the unreasonableness of its assumptions, it sought to minimize their import through the testimony of Rufus Harris, an expert in health care finance and accounting. Such objective was not, however, attained. Mr. Harris, employed during the course of these proceedings, actually prepared a completely new pro forma for the Boca program. That pro forma significantly changed Boca's average length of stay from 10 to 16 days; significantly reduced the number of full time equivalents (FTEs) in open heart surgery, recovery and the surgical intensive care unit (SIC) from 39.3 to 24.1; increased the number of support FTEs from 25 to 30 or 32; increased the cost per FTE in the open heart surgery program by $800; increased the cost for each support FTE by $14,000; included the indigent care assessment ($68,000), utility cost ($108,000) and malpractice insurance cost ($17,000) that had been omitted from the application; increased the supply cost by $618,000; and reduced deductions from revenue by $186,000. But for the charges, utilization levels, and payor mix, Mr. Harris' pro forma is a complete revision of Boca's application pro forma, and demonstrates that such pro forma was not based on reasonable assumptions. Although not based on reasonable assumptions, Mr. Harris opined that such failing is not material since Boca's pro forma, like his pro forma, calculated a profit. Mr. Harris' opinion is rejected. The bottom line profit he derived was based on a substantial change in Boca's proposed program. Such slight of hand does not address the financial feasibility of the program Boca proposed in its application. Boca's proposal, developed through the testimony of its construction, equipment and financial experts, bears little resemblance to its initial application, and must be rejected as an impermissible amendment. Boca's application proposed two operating rooms. As such, Boca could facially handle at least 500 open heart surgery cases per year. As amended, with one operating room, Boca could not reasonably expect to attain such level of operations, given the need to back up its cardiac catheterization program, contrary to Rule 10- 5.011(1)(f)3d. As proposed, Boca's open heart surgery program would include recovery areas and a 10-bed SICU, fully staffed. As amended, the SICU would be staffed with one FTE and other staffing substantially reduced. Through downsizing, Boca would presume to significantly alter its proposal, and thereby demonstrate the reasonableness of its cost and financial feasibility projections. Such was not, however, the proposal submitted to the Department for review, and it cannot be permitted, at this stage of the proceedings, to amend its proposal in such material respects. Accordingly, based on the record, Boca has failed to demonstrate the financial feasibility of its proposal. 11/ St. Mary's pro forma of income and expenses projects 200 adult and 10 pediatric open heart surgery cases during its first year of operation, and 240 adult and 20 pediatric during its second year of operation. Separate pro formas describe the adult and pediatric parts of St. Mary's proposal. Actual charges proposed by St. Mary's will vary by DRG, as will average length of stay. The weighted average charges are, however, projected to be $38,000 for adult services and $43,025 for pediatric services during its first year of operation, and $39,900 for adult services and $45,176 for pediatric services during its second year of operation, based on a 10 day average length of stay. Payor class mix for adults is estimated as follows: Medicare 50 percent, Medicaid 7 percent, self pay/commercial 40 percent, and indigent 3 percent. Payor class mix for pediatrics is estimated to be as follows: Medicare 0 percent, Medicaid 50 percent, self pay/commercial 40 percent, and indigent 10 percent. Net revenue over expenses for its adult program is projected, on an incremental cost basis, to be $2,297,566 for year one, and $2,885,102 for year two. Net revenue for its pediatric program is projected, on an incremental cost basis, to be $62,326 for year one, and $224,797 for year two. St. Mary's proposed charges, average length of stay, utilization levels, payor mix, as well as its assumptions regarding total deductions and expenses are not reasonable. St. Mary's proposed charges were not shown to be reasonably achievable. Rather, where, as here, a facility's charge structure is based on consumption of services, the increased costs associated with an open heart program, discussed infra, would translate into significantly higher charges than those proposed by St. Mary's. St. Mary's application contains no data to reasonably support its conclusions that it will achieve 200 adult cases in year one and 240 adult cases in year two, nor did the proof it offered at hearing demonstrate such potential. Rather, the persuasive proof demonstrated that St. Mary's could not reasonably expect to attract more than 80 adult open heart cases in its first year of operation, and that it would not even be able to attract 200 open heart cases during its third year of operation. Notably, the area St. Mary's proposes to serve is currently adequately served by two open heart surgery programs. St. Mary's pro forma contains several other serious flaws. First, its gross patient revenues are driven by an average length of stay of 10 days. Such assumption is unreasonable, and St. Mary's could more reasonably expect an average length of stay of 15-17 days, with significantly higher expenses associated with the greater consumption of resources occasioned by such increased length of stay. Second, St. Mary's payor mix is significantly understated for Medicare. Here, the proof demonstrates that St. Mary's could reasonably expect to achieve a 68-70 percent Medicare utilization rate, as opposed to the 50 percent it projected. Such increase would significantly reduce its self pay/commercial, assuming its Medicaid and indigent utilization levels are to be accorded any credence, and significantly increase its deductions from revenue. Third, St. Mary's pro forma significantly understated expenses, primarily with regard to supplies and FTEs. Had St. Mary's reasonably calculated its average length of stay at 15-17 days, its expenses for supplies and FTEs would have been substantially higher. Additionally, St. Mary's application only addresses the need to tap incremental FTEs in the nursing area, whereas initation of an open heart program would have a tremendous impact on all services in the hospital, such as lab, pharmacy and social services, with attendant higher costs. Based on the opinion of Richard Cascio, an expert in health care finance, which is credited, St. Mary's proposal is not financially feasible in the long term. 12/ Regarding St. Mary's pediatric open heart program, the proof, as heretofore found, fails to support is utilization projection of 10 cases in year one and 20 cases in year two. Therefore, St. Mary's has failed to demonstrate the long term financial feasibility of that program operated, as proposed, concurrently with an adult program. As a stand alone program, neither St. Mary's application nor the proof at hearing reasonably address such a prospect. However, since the pediatric program was not shown to be financially feasible with the adult program bearing a significant portion of operating expenses, it must also be concluded that the pediatric program would not be financially feasible were it to carry all operating expenses. Martin's pro forma of income and expenses is predicated upon 148 adult open heart surgery cases during its first year of operation, and 195 cases during its second year of operation. Actual charges proposed by Martin will vary by DRG, as will average length of stay. Projected average charges are, however, projected to be $41,000 during its first year of operation and $43,080 during its second year of operation, based on a 15.7 day average length of stay. Payor class mix is estimated as follows: Medicare 63.0 percent, Medicaid 2.5 percent, private pay/commercial insurance 32.5 percent, and free care 2 percent. Net revenue over expenses is projected to be $260,000 for year one and $337,000 for year two. Martin's utilization levels, proposed charges, payor mix, and average length of stay are reasonable. Martin's pro forma did, however, contain some unreasonable assumptions regarding expenses, primarily staffing costs. 13/ Martin's pro forma estimates staffing costs based on the manpower requirements (FTEs) and salaries set forth in Table 11 of its application. It further calculates fringe benefits at 20 percent of salaries. Notably, however, the number of people needed to staff a program at a given FTE level is significantly higher than the raw FTE number. Accordingly, since Martin projected its salary expense and fringe benefits based on FTE's, its expenses associated with those items are understated. Further, the salaries Martin proposed in Table 11 for its operating room nurses are entry level salaries and Martin could not reasonably expect to recruit experienced open heart surgery personnel at such rates. Nor is its projected salary for a perfusionist, at $59,551 reasonable. A more reasonable figure would be in excess of $75,000. Even though the proof offered in opposition to Martin's application did demonstrate that Martin's assumptions regarding salary expenses were understated, it failed to demonstrate that Martin could not meet current market demands and still be profitable. Rather, Martin's proposal, while generating a lower bottom line, will still be profitable if such increased expenses are considered, and it is financially feasible in the long term. While each of the applicant's have demonstrated the immediate financial feasibility of their projects, by demonstrating the availability of funds for project accomplishment and operation, only Martin has demonstrated the long term financial feasibility of its proposal. Other criteria bearing on capital expenditure proposals for the provision of new health services to inpatients. In cases of capital expenditure proposals for the provision of new health services to inpatients, Section 381.705(2), Florida Statutes, requires that the Department reference each of the following in its findings of fact: That less costly, more efficient, or more appropriate alternatives to such inpatient services are not available and the development of such alternatives has been studied and found not practicable. That existing inpatient facilities pro- viding inpatient services similar to those proposed are being used in an appropriate and efficient manner. In the case of new construction, that alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. That patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. In the instant case, none of the foregoing criteria can be answered in the affirmative. Rather, the proof demonstrates that less costly, more efficient or more appropriate alternatives currently exist through increased utilization of existing facilities. It further demonstrates that two of the existing three providers have not yet attained a 350 case per year level of operation, and that their services are therefore not yet being used at an appropriate level. Existing utilization levels and capacity further demonstrate that patients will not experience any serious problems in accessing such services. Finally, the applicants further failed to demonstrate that they had considered alternatives to new construction and had implemented them to the maximum extent possible. In the case of all applicants' there is no proof of any effort to initiate sharing arrangements. On the matter of Boca's complaints regarding delays experienced in effecting patient transfers by ambulance, as well as the inadequacy of such ambulances and their breakdowns, it offered no proof that it had investigated other ambulance services or its ability to operate its own service and found them impractable. Notably, such services are an item over which Boca has significant control, and its failure to investigate alternatives in this regard evidences the insignificance of any such problem. The criteria on balance. In evaluating the applications at issue in this proceeding, none of the criteria established by Section 381.705, Florida Statutes, or Rule 10- 5.011(1)(f), Florida Administrative Code, has been overlooked. The applicants' failure to demonstrate need, either numeric or not normal circumstances, as well as their failure to demonstrate compliance with Section 381.705(2), Florida Statutes, is, however, dispositive of their applications, and such failure is not outweighed by any other or combination of any other criteria. Further, even were the fixed need pool accorded the deference suggested by the Department, the other indicators of need subsumed within other criteria would dispel such illusion, and again compel the conclusion that there is no need in this case. Had numeric need been demonstrated, and the need requirements encompassed within section 381.705(2) satisfied, the proof would still fail to support an award to Boca or St. Mary's. Rather, among the competing applicants, Martin was shown to best satisfy the pertinent review criteria on balance and would, under such circumstances, be the favored applicant.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that a final order be entered denying the applications of Boca, St. Mary's and Martin for a certificate of need to establish an open heart surgery program in District IX. RECOMMENDED in Tallahassee, Leon County, Florida, this 15th day of March 1991. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of March 1991.
The Issue Whether this case presents "not normal circumstances" that lead to award to St. Anthony's Hospital, Inc., of a certificate of need for an Open Heart Surgery program?
Findings Of Fact The parties and existing programs in District 5. St. Anthony's Hospital, Inc., the applicant for CON No. 7418 (the subject of this proceeding), is a not-for-profit corporation. Its facility, St. Anthony's Hospital, at which the adult open heart surgery program would be operated if CON No. 7418 were granted, is a 427-bed licensed general community hospital providing adult acute medical services in surgery, psychiatry and obstetrics. Located south of Ulmerton Road in Pinellas County, (generally considered "South Pinellas County,") St. Anthony's also provides home health care, family medicine clinics, outreach education, health screening and occupational health. Also located in South Pinellas County are Bayfront Medical Center, All Children's Hospital, and Northside Hospital. Northside is not a party to this proceeding although it recently received approval for a CON to provide open heart surgery services. Northside is located 6-1/2 to 7 miles from St. Anthony's and provides services in the same service area. Bayfront Medical Center, Inc., is one of two intervenors in this proceeding. Its facility, Bayfront Medical Center is a 518-bed, acute care, not-for-profit hospital located within the limits of the city of St. Petersburg and 1.7 miles from St. Anthony's. It offers cardiac, cancer and emergency services as well as a Level II trauma center. Bayfront also maintains a large women's and children's program, a rehabilitation center and a neurology program. Its cardiology program includes adult and pediatric cardiac catheterization, angioplasty and open heart surgery. But the open heart surgery program is shared with All Children's Hospital. Pre-operative and post-operative patient care is Bayfront's responsibility. The actual surgery takes place on the premises of All Children's. All Children's Hospital is a research hospital affiliated with the University of South Florida College of Medicine. Most importantly, and certainly most pertinent to this case, it is a dedicated Class II pediatric specialty hospital, one of two pediatric specialty hospitals in Florida, and one of only 47 in the nation. It provides, therefore, primary, secondary and tertiary care for children, in addition to the open heart surgery services it provides adults. Its cardiac surgery program was grandfathered under CON law to begin children's cardiac surgery in 1975. At the time of the grandfathering, All Children's was asked by state officials to consider adult cardiac surgery services as well. The hospital trustees and medical staff agreed and began a combined pediatric/adult open heart surgery program in 1976. As explained, above, the adult program is shared with Bayfront. All Children's Hospital is not a party to this proceeding. Largo Medical Center, Inc.'s facility, Largo Medical Center is a 256- bed, acute-care hospital specializing in cardiology and open heart surgery. Largo, the other intervenor in the proceeding, is located in AHCA's District 5 but outside South Pinellas County, as are two other open heart surgery programs: a program at Morton F. Plant Hospital in Clearwater and a program at HCA Bayonet Point/Hudson Medical Center located in Hudson in Pasco County. Morton F. Plant Hospital and HCA Bayonet Point/Hudson Medical Center are not participants in this proceeding. The Agency for Health Care Administration is the single state agency authorized by Section 408.034(1), Florida Statutes, to issue or deny certificates of need, "written statements ... evidencing community need for a new ... health service [such as an adult inpatient cardiac catheterization program.]" Section 408.032(2), Florida Statutes. Standing of the Intervenors. Over half of Largo's open heart surgery patients originate from St. Anthony's defined service area and 35 percent from South Pinellas County. If St. Anthony's achieves its projected volume, Largo likely will lose 35 percent of its open heart surgery patients in the third year of operation. A loss of that number of patients will contribute to a substantial loss of revenue to Largo. As concerns Bayfront's standing to intervene in this proceeding, St. Anthony's purpose in seeking a CON for an open heart surgery program is to obtain authorization for a program to take the place of the All Children's/Bayfront adult open heart surgery program. As counsel for St. Anthony's made clear in oral representation during hearing, whether made clear from the face of St. Anthony's application or not, the application is a "replacement application for Bayfront/All Children's [open heart surgery program]." (Tr. 208.) Filing of the CON application Under cover of a certification of its authorized agent dated September 17, 1993, St. Anthony's Hospital, Inc., filed an application for Certificate of Need 7418 with the Agency for Health Care Administration. The application seeks expansion of existing cardiology services at St. Anthony's health care facility in Pinellas County to include an on-site program for adult open heart surgery. d . Background This is not the first time St. Anthony's has initiated proceedings to obtain a CON for open heart surgery. It has filed applications before because of its concern that South Pinellas County is not being served appropriately by the adult open heart services program shared by Bayfront Medical Center and All Children's Hospital. In the application in this case, St. Anthony's describes its previous attempts in this way: ... St. Anthony's has on eight occasions, since 1987, applied for a Certificate of Need to provide open heart surgery services. Each application has either been denied, or was withdrawn by St. Anthony's based on represent- ations St. Anthony's received that All Children's/Bayfront shared program was adequate and appropriate to meet the needs of south Pinellas adult open heart patients. St. Anthony's has historically deferred to All Children's so as not to unnecessarily duplicate services. St. Anthony's Ex. 1, p 27. In CON application 7396, filed July 14, 1993, All Children's Hospital requested AHCA to allow the hospital "to discontinue services to the adult cardiac surgery population effective June 30, 1994 ...". St. Anthony's Ex. No. 20, attachment at p.7. The reason for the request was that All Children's had experienced and projected to continue to experience growth in its pediatric surgery caseload. Since "All Children's mission and legal responsibility lies with Florida's children ... the [hospital's] obvious difficulty ... [was] how to continue dealing with a growing pediatric patient load with decreasing availability of facilities." Id. At the same time, although not increasing as rapidly as children's surgery, the growth of the caseload for adult open heart surgery, as of the summer of 1993, was continuing in St. Petersburg. As a licensed pediatric hospital, All Children's opined in CON Application 7396, [W]e are unable to expand the adult program in even a moderate fashion and are unable to provide the true continuum of adult cardiac care that adult cardiologists and surgeons believe to be needed in the community. Only an adult licensed hospital can provide those services and allow for future growth. Id., at 8. With regard to the growing pediatric patient load threatened by decreasing availability of facilities, the application projected, "a true crisis within one year in the surgery, SICU area if adjustments are not made to alleviate the situation." Id. The crisis, however, did not materialize. As of June 20, 1994, nearly one year after the filing of the withdrawal application, the President and Chief Executive Officer of All Children's Hospital was of the opinion that there was not a crisis in the care of pediatric patients. Nor was there a crisis in the care of adult open heart surgery patients. In fact, adult open heart surgery patients were receiving very high quality care within one year of the projection of crisis made in the application. The application to terminate the open heart surgery program was withdrawn prior to June 20, 1994. All Children's withdrew the application in response to wishes expressed in the community that the program be continued. Nonetheless, St. Anthony's viewed the representations made by All Children's in CON application 7396 to "impeach any continued suggestion by All Children's or Bayfront that the existing shared services agreement is a normal or appropriate setting for adult open heart services." St. Anthony's Ex. No. 1, pg. 27. It filed, therefore, the application that initiated this proceeding. Transfer Stress and Limitations of the All Chidren's/Bayfront OHS program. After pre-operative care at Bayfront, adult open heart surgery patients are transferred through an enclosed corridor connecting Bayfront to All Children's. The same corridor is used to transfer the patients back to Bayfront for appropriate post- operative care following the surgery and intensive care at All Children's. Patients typically suffer stress when being transferred from one institution to another. They certainly suffer "transfer stress" when being transferred from St. Anthony's to Bayfront for open heart surgery in the All Children's/Bayfront program, just as they would suffer stress in transfers from Bayfront to St. Anthony's were St. Anthony's application to be granted and were the St. Anthony program to take the place of the All Children's/Bayfront program. Typical transfer time, however, between Bayfront and All Children's is only about five minutes. Most patients do not realize they are going from one institution to another. Although the arrangement is less than ideal, it is doubtful that open heart surgery patients suffer stress due to the transfers from Bayfront to All Children's and back again. There are, however, some drawbacks with regard to angioplasty patients in the All Children's adult program. Ambulation of angioplasty patients cannot be appropriately observed postoperatively at All Children's because there are not telemetry facilities available at All Children's for observation. There are such facilities at Bayfront and the patients may be observed there post- operatively once out of the intensive care unit at All Children's. Carlos M. Estevez, M.D., is a cardiologist with St. Petersburg Medical Clinic with active privileges at St. Anthony's, Bayfront, All Children's and Edward White Hospital. Beds have been unavailable postoperatively for adult therapeutic anigoplasty patients of his on occasion at All Children's. The patients have been required to be transferred to Bayfront or back to St. Anthony's, with French sheaths in their groin, a less- than-ideal situation. Dr. Estevez' therapeutic anigoplasty patients requiring open heart backup at All Children's are typically discharged from All Children's after spending the night in the intensive care unit. For the average angioplasty patient, intensive care services are an overutilization of services. Dr. Estevez believes "crisis" would be a fair term to describe the current situation for his angioplasty patients in the All Children's/Bayfront program. Not Normal Circumstances Part of CON review is to look for factors the application shows to be "beyond the norm," or "any unusual circumstances." AHCA's interrogatory answer responded with regard to defining "not normal circumstances," in this way: There is no definition for "not normal circum- stances." In the absense (sic) of a projected numeric need pursuant to a fixed pool publication, an applicant may demonstrate valid need, justi- fiable evidence of situations or occurrences in a service area which are not accounted for such as access problems, which may support approval. St. Anthony's Ex. 7, p. 9. Circumstances of the All Children's/Bayfront Program. As a dedicated Class II pediatric specialty hospital, All Children's, alone, cannot provide the continuum of care needed by adult open heart surgery patients. Its provision of services, as stated above, is limited to surgery and postoperative intensive care. Other services in the continuum of care required by adult open heart surgery patients include admission to an emergency room, and pre-operative coronary care as well as post-operative care (other than intensive care) all the way through cardiac rehabilitation. The components of the continuum other than the actual surgery and post-op intensive care are provided by Bayfront and other hospitals. Despite All Children's inability to provide "continuum of care," by itself, to adult open heart surgery patients, the care provided the open heart surgery patient in the All Children's/Bayfront program is of high quality. All Children's physical site is limited for future growth both as to the adult open heart program and its pediatric programs. The physical outer limits of the hospital building are right on the property line, "all the way around. It has no room to expand." St. Anthony's Ex. No. 20. But for physical limitations, All Children's pediatric services would expand because the need for expansion in the pediatric program exists. The inability of the pediatric programs to expand compromises All Children's mission: pediatric care in a hospital dedicated to pediatrics. The adult open heart surgery program, if withdrawn, would free All Children's somewhat for further pediatric program growth both as to resources and space. But All Children's is no longer trying to withdraw from the program. All Children's board of trustees believes that only an adult licensed hospital can provide the continuum of care needed for adult open heart surgery patients and allow for future growth. Moreover, it is not possible to put together a competitive adult open heart pricing structure for the continuum of care that one hospital could provide when adult open heart surgery patients are being transferred from All Children's to and from other hospitals in order to provide the full continuum of care. AHCA's Response to the Application. AHCA's response to the application was denial based on a determination of no need to support the application. After review, AHCA determined that the application did not demonstrate that St. Anthony's could support sufficient volume even were the All Children's/Bayfront program to become non-operational. There was, however, an even more fundamental objection to granting the application on the part of the agency. As Elizabeth Dudek, Chief of the Certificate of Need and Budget Review sections of the agency, explained with regard to St. Anthony's premise that the application seeks to have its program "replace" the All Children's/Bayfront adult open heart surgery program, I don't understand that premise. I don't understand it because, one, the All Children's/ Bayfront program is still operational. There is no indication that the All Children's/Bayfront program has somehow indicated that it would relinquish its program volume to St. Anthony's. dditionally, ... by law they wouldn't be able to [accomplish a transfer] through the CON program, you can't transfer [or replace] a program ... Tr. 1534, ll. 2-12. Need. For those in need of open heart surgery services in South Pinellas County, there is another facility in South Pinellas County at which the services can be obtained: Northside. As for all of AHCA District 5, there are other facilities at which open heart surgery services are available. There is no evidence, despite the inability of the All Children's/Bayfront adult program to expand, that the needs of those requiring high quality open heart surgery services in South Pinellas County or AHCA District 5 are going unmet.
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the state agency responsible for the administration of certificate of need ("CON") laws in Florida. On February 5, 1993, AHCA published a need for one additional adult open heart surgery program in District 9. AHCA defines open heart surgery as a "tertiary health service" which, due to complexity, cost, and the relationship between volume and quality of care should be concentrated in a limited number of hospitals. Rule 59C-1.002(66), Florida Administrative Code. District 9 is located generally along the southeast coast of Florida and includes Palm Beach, Indian River, Martin, St. Lucie, and Okeechobee Counties. Palm Beach is the county at the southern end of District 9. The parties have referred to the counties other than Palm Beach, as the four northern counties. Martin County is north of Palm Beach, and St. Lucie, Okeechobee, and Indian River are further north. The applicants in this proceeding, seeking to establish an additional District 9 adult open heart surgery program, are Lawnwood Medical Center, Inc., d/b/a Lawnwood Regional Medical Center, Inc. ("Lawnwood"), St. Mary's Hospital, Inc. ("St. Mary's"), and Martin Memorial Medical Center, Inc. ("Martin Memorial"). Lawnwood Regional Medical Center Lawnwood is a 335-bed for-profit hospital located in Ft. Pierce, in St. Lucie County. Lawnwood has CON approval for the construction of an additional 18 skilled nursing beds and 10 level II NICU beds. In addition to the 335 licensed beds, Lawnwood has 16 unlicensed bassinets for a total of 351. Lawnwood's 335 licensed beds include 60 psychiatric beds, located one and a half blocks away from the main Lawnwood building, at a facility called Harbor Shores. Lawnwood has 260 general acute care beds. When Lawnwood filed its application, its parent corporation was HCA, Inc., a subsidiary of the Hospital Corporation of America. HCA was also the parent corporation of the Medical Center of Port St. Lucie, the only other hospital in St. Lucie County, and of Raulerson Hospital in Okeechobee County. After the application was filed and prior to hearing, a subsidiary of Columbia Health Care Corporation merged with HCA. As a result of the merger, the administrator of Lawnwood also serves as the market manager assigned to coordinate the services offered at the three hospitals. Lawnwood is classified by the State as a disproportionate share provider of Medicaid-reimbursed services for financially needy patients. In 1993, 21 percent of its total patient days were attributable to Medicaid and 4 percent to charity. Lawnwood operates an outpatient cardiac catheterization ("cath") laboratory and, in 1992, received CON approval to perform inpatient cardiac caths in a lab which was scheduled to open in October 1994. The outpatient lab opened in 1988 at Lawnwood. In 1989, 561 cardiac cath lab procedures were performed at Lawnwood, 494 in 1990, 362 in 1991, and 468 procedures in 1993. Although 602 procedures were reported to the local health council in 1993, these were performed on 468 patients, which is the number consistent with reporting methods of other cath labs. As a result of the diagnostic caths, 45 patients were referred for open heart surgery, and 98 for angioplasties. Of the 45 patients referred for open heart surgery, 26 were actually scheduled for the procedure. Lawnwood proposes to establish an adult open heart surgery program for a total project cost of $4.99 million. The project includes construction of two dedicated operating rooms, renovations to provide a 4-bed dedicated recovery room, and conversion of 12 acute care beds to construct a 12-bed cardiovascular intensive care unit ("CVICU"). St. Mary's Hospital St. Mary's is a 430-bed not-for-profit hospital, which has been operated 55 years by the Franciscan Sisters, currently through a parent organization called the Allegheny Health System. St. Mary's is the largest hospital in District 9, and the largest provider of womens' and childrens' medical services in the district. St. Mary's is a designated regional perinatal intensive care center with level II and III neonatal intensive care units, and is the designated level II trauma center for the northern area of Palm Beach County. Like Lawnwood, St. Mary's is recognized by the State as a disproportionate share provider of services to Medicaid reimbursed and indigent patients. It is approximately sixth in the state in the provision of services to financially needy patients. St. Mary's cardiac cath lab began operation in February 1988. There were 267 inpatient and 116 outpatient cardiac caths at St. Mary's lab in 1991, 240 and 118 respectively in 1992, and 171 and 115 respectively from January to November 1993. St. Mary's operates a 10-bed coronary care unit. St. Mary's proposes to establish an adult open heart surgery program for a total of $2,166,351, funded by private donors. The project will include renovations to two existing operating rooms and to a recovery room area. Martin Memorial Medical Center Martin Memorial is a 336-bed not-for-profit acute care hospital, with an additional 17 nursery/bassinets which are not required to be in the total licensed beds. The ultimate parent corporation for the Martin Memorial facilities and its foundation is Martin Memorial Health Systems, a not-for- profit corporation with a volunteer community board of directors. Martin Memorial's beds are divided between two campuses, with 236 beds in Stuart, and 100 in Port Salerno. The Port Salerno hospital opened in September, 1992 and is approximately 8 miles south of Stuart. Included in the 236 beds at Martin Memorial in Stuart are 5 level II neonatal intensive care beds, 23 intensive care unit beds, 45 ventilator, telemetry or other monitored beds, and 134 medical/surgical beds. Martin Memorial's existing cardiac services include a cardiac cath lab which opened in 1989 and, that year, reported 250 procedures. Caths at Martin reached the highest volume, 905 in 1991, followed by 799 in 1992, and 867 in 1993. Martin Memorial proposes to establish an adult open heart surgery program in Stuart for a total project cost of $3,594,720. Martin's project includes a newly constructed open heart surgery suite adjacent to the cardiac cath lab and, as a back-up, renovation of an existing operating room. As a part of an approved, separate CON application, Martin proposes to renovate and expand to accommodate a 13-bed surgical intensive care unit ("SICU") with four private rooms dedicated as a cardiovascular intensive care unit ("CVICU"). The expenses associated with the four CVICU rooms are included in the total open heart surgery project costs. Existing Open Heart Surgery Providers In Or Adjacent To District 9 All of the existing adult open heart surgery programs in District 9 are in Palm Beach County, at Delray Community Hospital ("Delray"), JFK Medical Center, Inc. ("JFK"), and AMI Palm Beach Gardens Community Hospital, Inc. d/b/a Palm Beach Gardens Medical Center ("Palm Beach Gardens"). The same services are also available in the adjacent districts to the north in District 7 at Holmes Regional Medical Center in Brevard County, and to the south in District 10 at AMI North Ridge General Hospital in Broward County. In addition, established referral patterns exist from District 9 to Miami Heart Institute in Dade County and Holy Cross Hospital in Broward County. All residents of District 9 have access to open heart surgery within two hours average drive time, which exceeds the geographic access standard of Rule 59C-1.033(4)(a), Florida Administrative Code. Delray is located in southern Palm Beach County and is a level II trauma center for that area. JFK is a 369-bed not-for-profit hospital located in Atlantis, Florida, approximately midway between Boca Raton and West Palm Beach, in north central Palm Beach County. The corporation which owns and operates JFK, also is the parent of a fund-raising foundation, and other subsidiaries, some of which are for-profit corporations. JFK has had an open heart surgery program since 1987. JFK's two operating rooms are equipped and sized identically, and located in close proximity to the two room cardiac cath lab and the intensive care unit. JFK has the capacity to perform up to 1000 cases annually, while actual annual volumes at JFK have ranged from 350 to 370 cases. Palm Beach Gardens is a 204-bed for-profit hospital located in the northern part of Palm Beach County. It operates the oldest open heart surgery program in the district, having started in 1982 or 1983. In fiscal year 1992- 1993, there were 477 open heart surgery patients at Palm Beach Gardens, of which 173 resided in the four northern counties of the District. Palm Beach Gardens has 11 operating suites, 7 capable of being used for open heart surgeries, and 4 dedicated solely to open heart surgeries. The current capacity of Palm Beach Gardens is 900 open heart procedures a year. By adding staff, Palm Beach Gardens could reach a volume of 1100 cases a year. While Palm Beach Gardens has excess capacity in its operating rooms, at the peak of its seasonal demand, delays occur in scheduling non-emergency surgeries due to inadequate capacity in its 24-bed intensive care unit. Occupancy levels in the 24 beds were 112.5 percent in 1993, according to Treasure Coast Health Council data. Although Palm Beach Gardens also suggested that an 8-bed overflow unit supplemented the 24 beds, accounting reports do not reflect billings for their use as intensive care services. Comparison of Applicants and Applications Subsection 408.035(1)(a) -- need in relation to state and local plans The 1989 state health plan, Healthy Floridians, includes six preferences for the review of open heart surgery applications. The first preference favors applicants establishing programs in counties with a population over 100,000 and a higher percentage than statewide average of 18.8 percent elderly persons. All the experts in health planning testified that the term "elderly" in this preference means persons 65 years of age and older, which is consistent with the age group with the greatest demand for open heart surgery. St. Mary, Lawnwood, and Martin meet the preference. The 1993 population of Palm Beach County was 900,000, St. Lucie's was 162, 598, and Martin's was 108,089. The population age 65 and over as a percentage of total population was 24 percent in Palm Beach, 21.2 percent in Lawnwood, and 27.5 percent in Martin County. The second state preference is for applicants who can demonstrate the ability to perform at least 350 annual procedures within 3 years of initiating an open heart program. Lawnwood reasonably projected a total of 314 open heart surgery procedures in year one, 350 in year two, and 386 in year three. Lawnwood's utilization projections are conservatively based on the assumption that, by the third year, 70 percent of its open heart patients will come from St. Lucie and Okeechobee Counties, which are already in its primary service area. Martin Memorial's expert questioned Lawnwood's projected open heart volumes from Martin and Indian River Counties, based on its acute care and cath lab patient origins. In addition, traditional referral patterns show Indian River patients going north to Brevard and Orange Counties, while Martin County patients go south to Palm Beach, Broward, and Dade Counties. Considering the acute care and cath lab competition within the four northern counties, the absence in that area of any competition for an open heart surgery program, the relative success of Lawnwood's outpatient cath lab despite its limitations and competition, and its affiliation with Port St. Lucie and Raulerson hospitals, Lawnwood established the reasonableness of its projected utilization. Lawnwood also reasonably expects to reverse some of the 73.5 percent out-migration for open heart surgery by residents of the northern four counties. See, Findings of Fact 27, infra. Martin Memorial's projections of 249 cases in year one, 317 in year two, and over 350 in year three are also reasonable. Martin Memorial's underlying assumptions, that its open heart surgery market share will at least equal that of its acute care, that it will keep some patients previously referred from its cath lab, and that, it, like Lawnwood, would reverse some district out-migration, are also reasonable. Martin Memorial referred 172 patients from its cath lab for open heart surgery in 1993, in contrast to 45 from St. Mary's, and 41 from Lawnwood. Martin Memorial's projections are based on 1991-1992 use rates which declined in 1993. Despite the one year decline and some expert predictions of a continuing downward trend in use rates, Martin Memorial's projections are bolstered by the fact that its open heart surgery primary service area includes Port St. Lucie, which contains 40 percent of the population of St. Lucie County and is the fastest growing area of District 9. That area, which is closer to Stuart, but is located in the St. Lucie County community in which Lawnwood has an affiliate hospital, supports both the projections of Lawnwood and Martin Memorial, and could be served by an open heart surgery program at either facility. Although Martin Memorial's projected volumes are higher than and inconsistent with other projections made by Martin Memorial, the reasonableness of the projections was established. St. Mary's projected 171 open heart surgeries in year one, 265 in year two, and 363 in year three. The projections are based on the use of a gravity model designed to determine potential volume "attracted" to the program by using the size of the hospital and the proximity of patients as factors. The model used a zip code level analysis to take into consideration the fact that St. Mary's expects a sub-county primary service area, as a result of sharing the county with the three existing District 9 providers. The projected utilization was reduced, by St. Mary's expert, to take into consideration an expected start- up factor. There is, however, substantial expert testimony that the variables and/or the weight attributed to each variable included in this gravity model are inadequate to explain actual or potential volumes. There is substantial evidence that the size of a hospital is not reliable enough to be one of only two variables in a model. For example, JFK although larger than Palm Beach Gardens, only exceeded 350 cases in 1991-1992 by 16, when smaller Palm Beach Gardens with an older open heart surgery program reached 499 cases. The model also fails to consider actual physician referral patterns. St. Mary's projections and its ability to exceed 350 cases also depend on its ability to attract Medicaid patients over and above the patients projected by the gravity model. See, Findings of Fact 35, infra. The volume of diagnostic cardiac caths at St. Mary's is low and has declined over the past three years. In part, the volume is low because there is no open heart surgery back-up available in the event the diagnostic cardiac cath indicates that need. Cath patients suspected of needing more invasive procedures are diverted by referring physicians to hospitals with angioplasty and open heart programs. But that explanation of St. Mary's volumes apparently is incomplete, since, by contrast Boca Raton Community Hospital and Martin Memorial, which also have no open heart surgery back-up, have had more steadily increasing cardiac cath volumes. The fact that St. Mary's cath volumes are low and its open heart surgery projections unreliable is also attributable to the fact that St. Mary's is located 11 miles north of JFK and 5 1/2 miles south of Palm Beach Gardens, therefore, at a competitive disadvantage with these established programs. The third state health plan preference applies to proposals, for improving access for persons currently leaving the district. With almost half of Palm Beach County open heart surgery patients receiving the service outside the county, St. Mary's claims to be in the best location to reverse that trend if geographical access is the problem. St. Mary's also points to the convenience of access to its hospital, which is 2 miles from Interstate 95, the main north-south transportation corridor through the district. Approval of St. Mary's proposal will not, however, reverse out-migration to the extent that it is attributable to factors such as seasonal residency, established physician referral practices from northern areas of District 9 to providers in adjacent districts, and managed care contractual arrangements. Lawnwood is located in the largest, fastest growing, and most centrally located county of the northern four counties. St. Lucie County is adjacent to each of the other three northern counties, with Martin to the south, Okeechobee to the west, and Indian River to the north. The level of "out-migration," defined as those patients leaving the district to receive the service, increases dramatically from south to north in District 9, from 55 percent in Martin, 70 percent in St. Lucie, 80 percent in Okeechobee, to 100 percent in Indian River County. Considering growth in western St. Lucie County, the needs of St. Lucie and Okeechobee County residents, and the alternative to out-migration provided for both Indian River and Martin County residents, the Lawnwood location is superior to that of Martin Memorial in terms of the ability to improve access to the service. See, also Findings of Fact 23-24, supra. The fourth state preference for applicants with a history of providing disproportionate share Medicaid and charity care favors the applications of St. Mary's and Lawnwood, in that order. Martin Memorial argues that it also meets the disproportionate share criteria, which the preference requires, although it has not been designated by the State, which the preference does not require. Relying on the criteria in subsection 409.911(2), Florida Statutes, Martin claims to meet or exceed the disproportionate share requirements for 1990, despite the agency's reliance on 1989 data. Assuming, arguendo, that Martin is entitled to the preference, the comparative ranking of St. Mary's first, Lawnwood second, and Martin third remains the same. In addition, the preference looks at a history of disproportionate service, as does subsection 408.035(1)(n), in part, which Martin failed to establish. For 1991, St. Mary's provided 15.8 percent of total District 9 Medicaid, Lawnwood provided 11.7 percent, and Martin Memorial, 1.7 percent. Martin Memorial established that it treated a larger number of Medicaid patients with circulatory diseases as a proportion of Medicaid patients in Martin County, as compared to St. Lucie County residents treated at Lawnwood. However, the absolute number of circulatory disease Medicaid patients treated at Lawnwood was approximately two and half times the number treated at Martin Memorial. Statistical indicators, including per capita income and low income patients diagnosed with circulatory diseases, demonstrate that residents of St. Lucie and Okeechobee Counties are less affluent, and more medically needy than those in Palm Beach and Martin Counties. The fifth state preference favors the applicant offering a service with the highest quality of care at the least expense. The preference includes an explanation that larger facilities usually have more available resources to meet the preference. As the largest hospital with the lowest cost per case by the second year of the program, $22,659, St. Mary's best meets the preference. Martin's projected cost is $26,909 and Lawnwood's is $27,085. Martin Memorial's expert calculated total expenses per case at $23,221 for Martin Memorial, $22,615 for St. Mary's, and $23,645 for Lawnwood. St. Mary's projected charges of $50,600 in year one and $53,100 in year two. Lawnwood projected charges of $55,199 in year one, and $58,133 in year two. Martin Memorial projected charges of $55,594, in year one, $58,955 in year two. Total project costs were estimated at $2,166,351 for St. Mary's, $3,594,720 for Martin Memorial, and $4,995,039 for Lawnwood. Using either set of cost data or the projected charges, St. Mary's best meets this preference based on size, the lowest total project costs, and the lowest projected charges for open heart surgery services. Martin Memorial and Lawnwood have, as described by one expert, remarkably similar costs, and the same is true of projected average charges per case. The final state preference favors applicants who will include protocols for the use of innovative therapeutic alternatives to surgery for appropriate patients, including streptokinase and tissue plaminogen activator therapies. Lawnwood and Martin Memorial currently use streptokinase. St. Mary's performs emergency angioplasties, and uses streptokinase therapy. All three applicants meet the preference for providing and/or planning to provide alternative therapies to open heart surgery. The first District 9 local health plan allocation factor gives a priority for established cardiac cath programs. Based on expert testimony, a cardiac cath program exceeding 150 annual procedures is established. All the applicants exceed the minimum volume and, therefore, comply with the allocation factor. Martin Memorial has the highest volume in an operational inpatient and outpatient lab and, meets the allocation factor better than Lawnwood and St. Mary's. The other District 9 factor favors applicants with a documented commitment to provide services regardless of patient's ability to pay. Lawnwood projects 2.51 percent Medicaid and 1.5 percent charity care in year two. St. Mary's projects providing 5 percent Medicaid and 3.5 percent charity care in year two. Martin Memorial projects 2 percent Medicaid and 1.9 percent charity care in year two. St. Mary's best meets the factor, followed by Lawnwood, and then Martin Memorial. More Medicaid residents live in the primary service area of Lawnwood than that of Martin Memorial. Martin has filed CON compliance reports demonstrating difficulty in meeting prior CON Medicaid conditions due to the demographics of its service area. Subsections 408.035(1)(b) - availability, quality of care, efficiency, accessibility, extent of utilization of like and existing programs; 408.035(2)(b) - appropriate and efficient use of existing inpatient facilities; and 408.035(2)(d) - serious problems in obtaining care without proposed new program(s). With the exception of seasonal excess demand for Palm Beach Gardens' ICU beds, the evidence demonstrates there is excess capacity in existing District 9 providers. Geographic access to existing providers in or adjacent to the district is also reasonable. The quality of care at existing providers is excellent. St. Mary's asserts that its proposal will best assist in alleviating access barriers to open heart surgery for low income persons with limited geographic mobility. One expert estimated that 38 District 9 Medicaid patients needed, but did not receive, open heart surgeries in 1991, based on the use rates for commercially insured patients. In general, the highest density of population with a demand for invasive heart therapies and open heart surgeries is concentrated in southern and central Palm Beach County. However, expert testimony established that Medicaid patients are underserved for reasons, other than the policies of the existing providers. The evidence does not show that St. Mary's proposal can overcome these financial barriers. St. Mary's is a level II trauma center, and maintains that trauma patients in need of open heart surgery are at risk of death from having to wait for transfers. Transfers of patients from St. Mary's to Palm Beach Gardens or JFK for open heart surgery take from three hours to three days, averaging 8 to 12 hours, in approximately 30 percent of the cases. From May 1991 through January 1994, over 2600 trauma patients were treated at St. Mary's. Expert testimony, after review of medical records, indicates that from one to six patients needed open heart surgery, an insufficient number to constitute a not normal circumstance for the establishment of an open heart program at St. Mary's. Palm Beach Gardens' position that an additional adult open heart surgery program is not needed in District 9 is rejected. Open heart surgery use rates are not increasing nationally or in Florida. However, District 9 population is increasing, as is open heart surgery utilization for District 9 as a whole, and for Palm Beach, St. Lucie and Okeechobee Counites, while remaining static in Martin County and decreasing in Indian River. Palm Beach Gardens and JFK have demonstrated that in Palm Beach County, an additional open heart surgery program is not needed, and would be detrimental to existing programs. See, Findings of Fact 51-52. Subsection 408.035(1)(c) - quality of care The applicants, like the existing providers, are accredited by the Joint Commission on Accreditation of Healthcare Organizations. All of the applicants provide excellent quality care, as indicated by their accreditations and proposals, compromised only by their ability to achieve the projected volumes. See, Findings of Fact 23-26. Subsection 408.035(1)(d) - alternatives or outpatient facilities and 408.035(2)(a) - alternatives to inpatient services There are no alternatives or facilities other than acute care hospitals in which open heart surgeries can be performed. The criterion is inapplicable to this case. Subsections 408.035(1)(e) - economies of joint or shared facilities and 408.035(2(k) - modernization or sharing arrangements as alternatives to new construction. Martin Memorial is a part of a network of hospitals planning a more formalized affiliation to attract managed care contracts. Lawnwood is a part of a large corporate group, which can offer experience in establishing an open heart surgery program. Neither of these arrangements entitles the applicants to special consideration under the statutory criterion, as it has been construed by AHCA. In this case, each applicant is a separate acute care hospital. An alternative arrangement for a shared program was considered by Martin Memorial, but there is no showing that any proposal which improves access for the northern four counties could avoid the necessity for new construction. Subsection 408.035(1)(f) - needs for equipment and services not accessible in adjoining areas There is no evidence that any applicant proposes to provide a service not readily available in adjoining areas. On the contrary, each applicant proposes to offer an alternative within the district for residents who currently use providers in adjoining areas. See, Finding of Fact 27. Subsection 408.035(1)(g) - need for research and educational programs There is no evidence that any of the applicants will meet research or educational needs, or is a teaching hospital. AHCA has strictly construed the statutory criterion to apply to teaching hospitals. Subsection 408.035(1)(h) - availability of resources, including staff, management, and funds for capital and operating expenditures, including personnel required in Rule 59C-1.033(5)(b). The Cleveland Clinic has expressed an interest in providing surgeons for Martin Memorial's program, but no agreement has been formalized. Martin Memorial was criticized for not having a full-time infectious disease specialist, inadequate pulmonary and nephrology specialists, and for being unable to perform transesophageal echocardiology, all of which are necessary to support an open heart surgery program. St. Mary's was criticized for not planning to have nurses assigned exclusively to its open heart surgery team. Lawnwood has been unable to attract full-time coverage in thoracic, orthopedic, and neurosurgery. Despite these specific criticisms, each applicant has successful recruitment mechanisms and affiliations which will be enhanced by the presence of an open heart surgery program. The applicants' staffing and equipment proposals are reasonable. Both St. Mary's and Lawnwood are subsidiaries of larger organizations which include hospitals with open heart surgery programs. Subsection 408.035(1)(i) - immediate and long term financial feasibility St. Mary's has the ability to establish an adult open heart surgery program for a total of $2,166,351, funded by private donors. St. Mary's provided a pro forma of expected revenues and expenses to establish financial feasibility based on two factors which were challenged, the average length of stay ("ALOS") and the mix of payer classifications for patients. St. Mary's projected 10.3 days as the ALOS. JFK's experts suggested that a 13-day ALOS is more reasonable, particularly for a new program. JFK's actual experience was an ALOS of 16.1 days in 1988, 14.5 days in 1992, and 12.6 days by the year ending June 1993. Mature programs generally have lower ALOS than newer ones. Currently, ALOS in the District are 10.9 for Palm Beach Gardens, 12.5 for Delray, and 14.5 for JFK. JFK's assertion that St. Mary's initial ALOS will more likely be 13 days not 10.3 is reasonable. The fact that the ALOS will be longer than that projected in the pro forma means that expenses for the care of each patient will be greater, while revenues will not increase proportionately. Revenues are limited in fixed Diagnostic Related Group ("DRG") reimbursement categories, such as Medicare and managed care, which are the dominant payer groups, in contrast to the more flexible per diem reimbursement of commercial insurers. St. Mary's failed to include revenues and expenses for the construction period, anticipating only capital expenditures and start-up costs for implementing a new service. St. Mary's pro forma was based on a first year payer mix which includes 12.4 percent managed care and 11.6 percent commercial insurance in 1995. At JFK, the open heart surgery payor mix was 33 percent managed care and 9 percent commercial in 1993. St. Mary's underestimated the proportion of patients in the DRG-based managed care category, as compared to the per diem arrangements typical of commercial insurance. Taking into consideration increased expenses of $251,000 in year one and $409,000 in year two, due to adjustments from 10.3 to 13 days in the ALOS, and reduced revenues of $350,000 in year two, St. Mary's proposal is not financially feasible. The conclusion is also compelled by St. Mary's failure to establish the reasonableness of its utilization projections for the program. See, Finding of Fact 25. Martin Memorial has the funds necessary to establish an open heart surgery program for $3,594,720. Its pro forma shows revenues and expenses for the construction period, which are identical with or without the open heart surgery program. Martin Memorial's pro forma is flawed by double counting revenues from patients currently spending some time and revenues at Martin Memorial prior to transfers for open heart surgery. Revenues associated with pre-transfer stays must be deducted from revenues for open heart surgeries of average total lengths of stay. The amounts of over-stated revenues were not calculated by Palm Beach Gardens expert, and other criticisms of Martin Memorial's pro forma are rejected. Lawnwood, like St. Mary's, failed to include any construction period revenues and expenses in its pro forma. Lawnwood, as a separate legal entity, does not have the funds to establish its open heart surgery program, without relying on its parent, Hospital Corporation of America. The commitment of funds, represented by a letter dated April 30, 1993, indicated the source as either internally generated cash or available lines of credit. Lawnwood demonstrated its financial feasibility, in part, by showing that its open heart program's break-even point, at which expenses and revenues would be equal is 182 cases, well below projected utilization. See, Findings of Fact 23. Subsection 408.035(1)(j) - special needs and circumstances of health maintenance organizations The applicants do not propose to provide any different or special services for health maintenance organizations, nor is any applicant in this batch itself a health maintenance organization, as required by AHCA's interpretation to the statutory criterion. NME Hospitals, Inc., d/b/a West Boca Medical Center v. HRS, DOAH Case Nos. 90-7037 and 91-1533 (F.O. 4/8/92). Subsection 408.035(1)(k) - substantial, specialty services to non-residents of the service district Although the applicants propose to provide open heart surgery, which is one of the specialty services listed in the statute, they do not project that they will serve residents of other districts. The applications are not distinguishable on the basis of Subsection 408.035(1)(k), Florida Statutes. Subsection 408.035(1)(l) - impact on costs and effects of competition with existing providers. If St. Mary's proposal is approved and, as St. Mary's projects, two- thirds of its patients come from existing district providers, the program at JFK will be adversely affected. As the result of JFK's loss of approximately 106 cases, its net income could also be reduced up to $2.6 million. By contrast, programs at Lawnwood or Martin Memorial would have a negligible impact on JFK. The existing program at Palm Beach Gardens would suffer an adverse impact from the approval of programs at either St. Mary's or Martin Memorial. The adverse impact of a program at Martin Memorial is greater. Palm Beach Gardens could lose from 128 to 142 cases in the first year and from 179 to 198 cases in the third year in the worst case scenarios, depending on whether the use rate declines or remains constant. In addition, the further development of the VHA Network proposed by some District 9 hospitals, including Martin Memorial, as a means to attract managed care contracts, would enhance referrals to an open heart surgery program at Martin Memorial. Reasonable estimates of the financial loss to Palm Beach Gardens range between $2.8 and $3.1 million, although Palm Beach Gardens, with $9 million in annual income, would still be profitable. While the numeric calculations required in Rule 59C-1.033(7)(c), Florida Administrative Code, indicate that there will be enough total open heart surgeries to allow each of the existing providers to continue to exceed 350 operations, Palm Beach Gardens would be disproportionately, adversely affected by a program at Martin Memorial, as would JFK by a program at a St. Mary's. As the lowest volume provider, JFK is also at greater risk of dropping below the 350 minimum level established as indicative of the quality of care. Subsection 408.035(1)(m) - costs and methods of construction With total project costs of $4.99 million, Lawnwood's proposal to construct two new, dedicated operating rooms is the most expensive. Martin Memorial's cost of $3.59 million includes new construction of one and renovation of another operating room. St. Mary's low project cost of $2.16 reflects the fact that renovations rather than new construction is planned. The advantages of new construction, however, are that the size of the operating rooms will exceed general state requirements, and comply with recommendations developed specifically for open heart surgery. See, Findings of Fact 58, infra. Subsection 408.035(1)(n) - past and proposed service to Medicaid and medically indigent patients Based on history and proposed service, the applicants rank, in order, St. Mary's, Lawnwood, and Martin Memorial in complying with the criterion. See, Findings of Fact 28 and 32, supra. Subsection 408.035(1)(o) - continuum of care in multilevel system, including acute, skilled nursing, and home health care The applicants failed to distinguish their proposals on the basis of this statutory criterion. Other Criticisms of the Applications St. Mary's has a 16-bed intensive care unit, 4 of those beds will require no additional equipment to be used to provide post-operative care for open heart surgery patients. The 4 beds are located adjacent to the intended open heart surgery operating suite. The proposed 4-bed ICU was criticized for being too crowded, and inadequately designed to allow adequate patient observation and monitoring, and for not being dedicated solely to open heart surgery patients. The 16-bed unit has experienced over 90 percent occupancy rates, but some of those patients have required the staffing, but not the equipment available in the intensive care unit. St. Mary's acknowledged potential capacity problems, but has the ability to create additional step-down unit beds to relieve the ICU unit, when necessary. In addition, outpatient surgeries were scheduled to be performed in a separate facility beginning in July 1994. While some clinicians may prefer a separate ICU, there was no evidence of any requirements that open heart surgery patients receive post-operative care in a separate ICU, nor that the lack of a specialized unit means a lack of staff capable of caring for such patients. St. Mary's project involves the renovation of a total of 1731 square feet, 764 net square feet of that in the main operating room on the first floor. The back-up operating room at St. Mary's is 480 square feet, below the American College of Cardiologists' recommendation and 1992 Federal Guidelines of a minimum of 600 and up to 800 square feet. Despite the term "back-up," expert testimony established the need for regular use of both operating rooms, one for regularly scheduled procedures and one for emergencies which occur within the cardiac cath lab or the post-operative intensive care unit. The size of St. Mary's back-up operating room meets state requirements for operating rooms, which do not differentiate on the basis of the type of surgery. St. Mary's also demonstrated that open heart surgeries are performed in comparably sized or smaller operating rooms at JFK. The space allocated to Lawnwood's 4-bed open heart surgery recovery room was criticized as inadequate to accommodate the equipment and personnel required to monitor and, if necessary, to revive post-operative patients. The space allocated complies with state licensure requirements. Reconfiguration of the beds and equipment in the space is permissible, if necessary, in final construction documents which must be approved by AHCA. Lawnwood's proposal was also criticized because the CVICU will be located three stories above the surgical area and recovery rooms. There was no evidence that the location of the CVICU violated licensure requirements or compromised the quality of care. The use of restricted elevator access between the surgical/recovery area and the CVICU is reasonable. AHCA favored the applications of both Lawnwood and Martin over that of St. Mary's due to their locations outside Palm Beach County. Having been told by staff that it was then a "toss up" between the two, AHCA's Division Director selected Martin Memorial. The Division Director, Dr. James Howell, is a former Deputy District Administrator for AHCA District 9 and former County Health Director for Palm Beach County. In explaining his decision, Dr. Howell testified as follows: Q. Ultimately, sir, you recommended to Ms. Dudek that Martin be approved rather than Lawnwood; isn't that correct, sir? A. Yes, sir. In our mutual discussions we had a discussion about two. To be straightforward, the reason that I'd recommended Martin was that Martin is a long-term community hospital with local community responsiveness or local community board of directors, as far as I know, and that AHCA owned - now I believe, it's part of the Columbia system, was in St. Lucie County and was a newer hospital, and that, you know, I felt more comfortable with giving the first CON in the area to a group that had a long heritage and commitment to the area, even though I can tell you I can't say anything negative about AHCA in dealings with them. Q. Or Columbia? A. Or Columbia; right. I can't say anything. That's not meant to be prejudicial with them. They did a good job with us, with maternity/child health. Q. You did approach this batch, did you not, sir, with a bias towards Martin Memorial because you knew the institution had been there a long, long time and was a very stable institution; isn't that correct? A. That is quite correct, yes, sir. See, Transcript, p. 251. The court reporter's references to "AHCA" are corrected and understood, in this context, to refer to HCA or Hospital Corporation of America. The statutory and rule criteria, on balance, demonstrate that open heart surgery programs at Martin Memorial or Lawnwood are more likely to improve access, to meet projected volumes, and to be financially feasible. Of these two, however, Lawnwood is better situated to reverse district out-migration, and has to be preferred, under the state and local health plans and subsection 408.035(1)(n), Florida Statutes, for its history of providing a disproportionate share of its services to Medicaid and charity patients. Finally, the most significant distinction between the applicants is that the quality of care at existing providers, as measured by their volumes of open heart surgeries, will not be adversely affected by the approval of a new program at Lawnwood. Application Content AHCA accepted Martin Memorial's application, although two different letters of intent for mutually exclusive open heart surgery programs were filed simultaneously by Martin Memorial, one for a program shared with Indian River Memorial, and one for a separate program. Martin Memorial's application also, arguably exceeds the scope of its Board approval by including renovation of a portion of the surgical intensive care unit ("SICU"). AHCA accepted Martin Memorial's proposal to allocate the cost of 4 of 13 SICU beds to the open heart surgery project. As a practical matter, Martin Memorial's witnesses concede, the 4 beds cannot be constructed independently. The Board separately authorized the filing of an expedited CON for the SICU construction and renovations. In an Additional Motion For Summary Recommended Order Palm Beach Gardens' submitted correspondence between AHCA and Martin Memorial attempting to establish that the separate SICU CON has expired. AHCA accepted Lawnwood's application without a construction period pro forma, and without identification of the ultimate parent corporation of the subsidiary, Lawnwood Medical Center, Inc.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency For Health Care Administration enter a Final Order issuing Certificate of Need 7245 to Lawnwood Medical Center, Inc., denying Certificate of Need 7244 to St. Mary's Hospital, Inc., and denying Certificate of Need 7243 to Martin Memorial Medical Center, Inc. DONE AND ENTERED this 13th day of March, 1995 in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of March, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-4908 To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact: Petitioner, Lawnwood's Proposed Findings of Fact. Accepted in Findings of Fact 2. Accepted in Findings of Fact 3. Accepted in Findings of Fact 16. Accepted in Findings of Fact 4. Accepted in Findings of Fact 5. 6-12. Accepted in or subordinate to Findings of Fact 27. 13. Accepted in Findings of Fact 13. 14-20. Accepted in or subordinate to Findings of Fact 27. Accepted in or subordinate to Findings of Fact 16 and 19. Accepted in Findings of Fact 24. 23-39. Accepted in or subordinate to Findings of Fact 27. 40-47. Accepted in or subordinate to Findings of Fact 34. 48-61. Accepted in or subordinate to Findings of Fact 28. 62-64. Accepted in relative terms or subordinate to Findings of Fact 27. 65-70. Accepted in or subordinate to Findings of Fact 28. 71-73. Accepted in part or subordinate to Findings of Fact 24 and 28. 74-86. Accepted in part or subordinate to Findings of Fact 2, 23 and 27. 87. Issue not reached. 88-94. Accepted in or subordinate to Findings of Fact 23. 95. Rejected in part and accepted in part in Findings of Fact 24. 96-100. Accepted in Findings of Fact 23. 101-105. Accepted in general in Findings of Fact 24. 106-111. Accepted in Findings of Fact 47. Accepted in general in Findings of Fact 22-29. Accepted in Findings of Fact 22. Accepted in Findings of Fact 23. Accepted in Findings of Fact 27. Accepted in Findings of Fact 28. Accepted in relevant part in Findings of Fact 28. Accepted in Findings of Fact 29. Accepted in Findings of Fact 30. 120-122. Accepted in or subordinate to Findings of Fact 31. 123-131. Accepted in or subordinate to Findings of Fact 5, 43, and 48. 132-133. Accepted in or subordinate to Findings of Fact 43. 134-146. Accepted in or subordinate to Findings of Fact 48. Accepted in or subordinate to Findings of Fact 45, 48 and conclusions of law 66. Accepted in or subordinate to Findings of Fact 48. 139-141. Accepted in or subordinate to Findings of Fact 29. 142-147. Accepted in or subordinate to Findings of Fact 48. 148-152. Accepted in Findings of Fact 8 and 53. Accepted in Findings of Fact 43. Subordinate to Finding of Fact 53. 155-164. Accepted in or subordinate to Findings of Fact 59. 165-173. Accepted in or subordinate to Findings of Fact 43. 174. Accepted in or subordinate to Findings of Fact 38 and 43. 175-176. Accepted in Findings of Fact 7. Accepted in or subordinate to Findings of Fact 38 and 43. Accepted in or subordinate to Findings of Fact 53. Accepted in or subordinate to Findings of Fact 43. 180-181. Accepted in Findings of Fact 38. 182-187. Accepted in Findings of Fact 61. 188. Rejected in Findings of Fact 61. Petitioner, Palm Beach Gardens' Proposed Findings of Fact. 1-3. Accepted in Findings of Fact 16-19. Accepted in Findings of Fact 5 and 8. Accepted in Findings of Fact 13 and 15. Accepted in Findings of Fact 9 and 12. Accepted in preliminary statement. Accepted in Findings of Fact 3. Accepted in Findings of Fact 3 and 16. 10-15. Accepted in or subordinate to Findings of Fact 61. Rejected in conclusions of law 69. Rejected in Findings of Fact 53. Rejected in Findings of Fact 2 and 27. 19-25. Accepted in or subordinate to Findings of Fact 16 and 33. 26. Accepted in or subordinate to Findings of Fact 34. 27-44. Accepted in or subordinate to Findings of Fact 52. 45-48. Accepted in or subordinate to Findings of Fact 18-19 and 27-28. 49-52. Accepted in or subordinate to Findings of Fact 51 and 52. 53. Accepted in general in Findings of Fact 27. 54-55. Accepted in or subordinate to Findings of Fact 33. 56-60. Accepted in or subordinate to Findings of Fact 34. 61. Rejected "substantially" in Findings of Fact 52. 62-72. Accepted in or subordinate to Findings of Fact 16, 27, and 33. 73-76. Accepted in or subordinate to Findings of Fact 27. 77-84. Accepted in or subordinate to Findings of Fact 52. 85-92. Accepted in or subordinate to Findings of Fact 27,28 and 34. 93-103. Accepted in or subordinate to Findings of Fact 28. 104-105. Accepted in Findings of Fact 31. 106. Accepted in Findings of Fact 32. 107-109. Accepted in or subordinate to Findings of Fact 28 and 32. 110-111. Accepted in Findings of Fact 22. 112-125. Accepted in or subordinate to Findings of Fact 23. 126. Accepted in or subordinate to Findings of Fact 5. 127-141. Accepted in Findings of Fact 23 and 24. 142. Rejected in Findings of Fact 7 and 23. 143-145. Accepted in or subordinate to Findings of Fact 7 and 23. 146-151. Issue not reached. 152-158. Accepted in or subordinate to Findings of Fact 24. 159-160. Accepted in Findings of Fact 27. 161-162. Accepted in Findings of Fact 28. Accepted in part in Findings of Fact 28. Accepted in or subordinate to Findings of Fact 29. 165-167. Accepted in or subordinate to Findings of Fact 29. 168-169. Accepted in Findings of Fact 30. 170. Accepted in Findings of Fact 21-30. 171-172. Rejected in general in Findings of Fact 47. 173. Accepted in Findings of Fact 47. 174-184. Rejected or subordinate to Findings of Fact 47. 185-187. Rejected or subordinate to Findings of Fact 43 and 47. 188-193. Accepted in Findings of Fact 47. 194-199. Subordinate to Finding of Fact 47. 200. Accepted in Findings of Fact 29. 201-208. Accepted in or subordinate to Findings of Fact 52. 209. Rejected. 210-218. Accepted in or subordinate to Findings of Fact 52. 219. Rejected conclusion as to "substantial" in Findings of Fact 52. 220-229. Accepted in or subordinate to Findings of Fact 52. 230. Rejected conclusion as to "substantial" in Findings of Fact 52. Petitioner, St. Mary's, Proposed Findings of Fact. 1-3. Accepted in or subordinate to Findings of Fact 9. Accepted in Findings of Facts 3 and 22. Accepted in or subordinate to Findings of Fact 9. Accepted in or subordinate to Findings of Fact 12. Accepted in or subordinate to Findings of Fact 10. Accepted in or subordinate to Findings of Fact 27. Accepted in Findings of Fact 2. 10-12. Accepted in or subordinate to preliminary statement and Finding of Fact 12. 13-14. Accepted in or subordinate to Findings of Fact 58. 15-17. Accepted in or subordinate to Findings of Fact 43. 18-24. Accepted in Findings of Fact 30. 25-26. Rejected in Findings of Fact 44-46. 27-29. Accepted in Findings of Fact 30. Rejected in Findings of Facts 44-46. 31-32. Accepted in or subordinate to Findings of Fact 44. 33-35. Accepted in or subordinate to Findings of Fact 43. 36. Accepted in or subordinate to Findings of Fact 56. 37 Accepted in or subordinate to Findings of Fact 9. Accepted in Findings of Fact 38. Accepted in or subordinate to Findings of Fact 58. Accepted in or subordinate to Findings of Fact 60. 41-44. Accepted in or subordinate to Findings of Fact 56 and 57. 45-54. Accepted in or subordinate to Findings of Fact 35. 55. Rejected in Findings of Fact 35. 56-57. Accepted in or subordinate to Findings of Fact 34. 58. Conclusion rejected, although access is limited by comparison to commercially insured patients, See, Findings of Fact 34. 59-66. Accepted in or subordinate to Findings of Fact 34. 67-73. Accepted in Findings of Facts 9, 28 and 32. Accepted in Findings of Fact 9. Accepted in Findings of Fact 32. Accepted in Findings of Fact 34. Rejected as significant benefit in Findings of Fact 34. Accepted (as both interests can be better accomplished) in Findings of Fact 27. Accepted in or subordinate to Findings of Fact 25. 80-81. Rejected in Findings of Fact 25. Accepted in Findings of Fact 25. Rejected in Findings of Fact 25. Rejected in Findings of Fact 25. Rejected as valid in Findings of Fact 34. 86-88. Accepted in Findings of Facts 27 and 36. 89-91. Accepted in part or subordinate to Findings of Fact 26. Rejected in Findings of Fact 26. Rejected in Findings of Fact 25 and 26. Accepted in Findings of Fact 22. Rejected in Findings of Fact 25-26. Rejected in general in Findings of Fact 27. 97-98. Accepted in or subordinate to Findings of Fact 28. Accepted in Findings of Fact 29. Accepted in Findings of Fact 30. Rejected conclusion in Findings of Fact 35. Accepted in Findings of Fact 31 and 32. 103-104. Accepted in Findings of Fact 27. 105. Accepted in Findings of Fact 37. 106-107. Rejected in Findings of Fact 51. Accepted in or subordinate to Findings of Fact 51. Accepted in Findings of Fact 35. Rejected in Findings of Fact 47. Rejected in Findings of Fact 48. Rejected in Findings of Fact 24. Intervenor, JFK Medical Center, Inc.'s Proposed Findings of Fact. Accepted in Findings of Fact 9. Accepted in Findings of Fact 18. Accepted in or subordinate to Findings of Fact 12. 4-6. Accepted in or subordinate to preliminary statement. 7-9. Accepted in or subordinate to Findings of Fact 2. Accepted in or subordinate to Findings of Fact 16-19. Accepted in Findings of Fact 27. Accepted in relevant part in Findings of Fact 16 and 27. 13-19. Accepted in or subordinate to Findings of Fact 34. Accepted in Findings of Fact 18 Accepted in Findings of Fact 35. Accepted in Findings of Fact 19. 23 Accepted in relevant part in Findings of Fact 33. 24. Accepted in Findings of Fact 36. 25-27. Accepted in or subordinate to Findings of Fact 33. 28-31. Accepted in or subordinate to Findings of Fact 27. 32-34. Accepted in or subordinate to Findings of Fact 27 and 34. 35-44. Accepted in or subordinate to Findings of Fact 35. 45-48. Accepted in or subordinate to Findings of Fact 25. 49-50. Accepted in or subordinate to Findings of Fact 26. 51. Accepted in or subordinate to Findings of Fact 25. 52-57. Accepted in Findings of Fact 44-46. 58. Subordinate to Finding of Fact 44-46. 59-66. Accepted in or subordinate to Findings of Fact 51. 67-75. Accepted in or subordinate to Findings of Fact 59. 76-78. Rejected in Findings of Fact 59. 79-80. Accepted in or subordinate to Findings of Fact 25. 81-82. Rejected in or subordinate to Findings of Fact 57. 83-84. Accepted in or subordinate to Findings of Fact 52. 85. Accepted in Findings of Fact 43. 86-89. Accepted in or subordinate to Findings of Fact 58. Respondent, AHCA's Proposed Findings of Fact. 1. Accepted in general or subordinate to Findings of Fact 5-8. 2. Accepted in or subordinate to Findings of Fact 9-12. 3. Accepted in or subordinate to Findings of Fact 13-15. 4. Accepted in Findings of Fact 16 and 18. 5. Accepted in Findings of Fact 6 and 19. 6. Accepted in preliminary statement and Findings of Fact 2. 7. Accepted in Findings of Fact 31 and 32. 8. Accepted in Findings of Fact 31. 9. Accepted in or subordinate to Findings of Fact 7. Subordinate to Findings of Fact 7. Accepted in Findings of Fact 11 and 26. Accepted in or subordinate to Findings of Fact 14. 13,14. Accepted in or subordinate to Findings of Fact 6, 28 and 32. 15. Accepted in or subordinate to Findings of Fact 10, 28 and 32. 16,17. Accepted in or subordinate to Findings of Fact 28 and 32. Accepted in Findings of Fact 21-30. Accepted in Findings of Fact 22. 20,21. Accepted in part in Findings of Facts 23 and 24. Accepted in Findings of Fact 24. Accepted in or subordinate to Findings of Fact 25, 26 and 27. Accepted in Findings of Fact 27. Accepted in Findings of Fact 28. Subordinate to Findings of Fact 29. Accepted in Findings of Fact 5, 9 and 13. Rejected conclusion in terms of other indicators in Findings of Fact 29. Accepted in or subordinate to Findings of Fact 5, 9, 13 and 29. Accepted in Findings of Fact 29. 30-33. Accepted in or subordinate to Findings of Fact 23-26. Accepted in Findings of Fact 30. Accepted in Findings of Fact 27 and 34-37. 36-37. Accepted in or subordinate to Findings of Fact 27. 38. Accepted in Findings of Fact 35. 39-42. Accepted in or subordinate to Findings of Fact 32 and 34. Accepted in Findings of Fact 18. Accepted in Findings of Fact 51. Accepted conclusion in Findings of Fact 52. 46-48. Accepted in Findings of Fact 23-26 and 38. Accepted in Findings of Fact 14 and 24. Accepted if last line changed from "St. Mary's" to "Lawnwood" in Findings of Fact 27, 36 and 37. 51-52. Accepted in Findings of Fact 40 and 61. Accepted in Findings of Fact 42. Accepted in Findings of Fact 29. Accepted in Findings of Fact 48. Accepted in Findings of Fact 44-46. Accepted in Findings of Fact 47. Accepted in Findings of Fact 29 and 51. Respondent, Martin Memorial's Proposed Findings of Fact. Accepted in Findings of Fact 2. Accepted in preliminary statement. Accepted in or subordinate to Findings of Fact 13. Accepted in or subordinate to Findings of Fact 9. 5-6. Accepted in or subordinate to Findings of Fact 5. Accepted in or subordinate to Findings of Fact 7, 11 and 14. Accepted in or subordinate to preliminary statement and Findings of Fact 19. Accepted in or subordinate to preliminary statement and Findings of Fact 18. Accepted in preliminary statement and Finding of Fact 1. Accepted in Findings of Fact 3 and 16. Accepted in or subordinate to Findings of Fact 23 and 24. Accepted in or subordinate to Findings of Fact 20. 14-15. Accepted in or subordinate to Findings of Fact 14. Accepted in or subordinate to Findings of Fact 15. Subordinate to Finding of Fact 13. Accepted in Findings of Fact 12. Accepted in relevant part or subordinate to Findings of Fact 8 and 49. 20-21. Accepted in Findings of Fact 61. Accepted in Findings of Fact 62. Accepted in preliminary statement and Finding of Fact 2. Accepted in Conclusions of Law 74. Accepted in Findings of Fact 52. Accepted in Findings of Fact 38. 27-28. Rejected conclusion that program is superior in terms of quality of care in Findings of Fact 38. 29-30. Accepted in or subordinate to Findings of Fact 43. Accepted in general or subordinate to Findings of Fact 43. Rejected in or subordinate to Findings of Fact 59. 33-34.. Accepted conclusion in Findings of Fact 43. 35-37. Accepted in or subordinate to Findings of Fact 23-26. 38-40. Conclusion rejected in substantial part in Findings of Fact 23. 41-43. Accepted in substantial part in Findings of Fact 24. 44. Accepted in Findings of Fact 47. 45-48. Accepted in or subordinate to Findings of Fact 48. 49-50. Rejected in Findings of Fact 66 and 67. 51-52. Accepted in or subordinate to Findings of Fact 29. Rejected conclusion in part in Findings of Fact 23 and 24. Accepted in Findings of Fact 27. 55-59. Accepted in or subordinate to Findings of Fact 28 and 34. 60. Conclusion rejected in Findings of Fact 32. 61-62. Accepted in Findings of Fact 27. 63. Rejected in general in Findings of Fact 23 and 27. 64-65. Rejected as to alternatives for "residents most likely" to the extent that is inconsistent with need in relation to state plan, in Findings of Fact 27. Accepted in Findings of Fact 51 and 52. Accepted in or subordinate to Findings of Fact 52. Rejected in Findings of Fact 52. 69-70. Accepted in or subordinate to Findings of Fact 52. Accepted in Findings of Fact 22 and 30. Rejected conclusion in Findings of Fact 23 and 24. Accepted except last sentence in Findings of Fact 27. 74-75. Accepted in Findings of Fact 28. 76-77. Accepted in or subordinate to Findings of Fact 29. Rejected conclusion or subordinate to Findings of Fact 29. Accepted in Findings of Fact 32. 80-82. Accepted in or subordinate to Findings of Fact 31. COPIES FURNISHED: W. David Watkins, Esquire 2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 (Counsel for St. Mary's Hospital) Michael J. Cherniga, Esquire David C. Ashburn, Esquire Greenberg, Traurig, Hoffman, et al. Suite 2000 111 South Monroe Street Tallahassee, Florida 32302 (Counsel for Palm Beach Gardens Community Hospital) Elizabeth McArthur, Esquire 101 North Monroe Street, Suite 1000 Post Office Drawer 11307 Tallahassee, Florida 32302 (Counsel for Lawnwood Medical Center) Leslie Mendelson, Esquire Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Byron B. Mathews, Jr., Esquire 201 South Biscayne Boulevard Suite 2200 Miami, Florida 33131 Robert A. Weiss, Esquire John M. Knight, Esquire The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
Findings Of Fact Application Process Humhosco is a wholly owned subsidiary of Humana, Inc. Humhosco owns Humana Hospital Brandon and other hospitals in Florida. The record does not disclose thee number of such hospitals or whether Humhosco owns other assets. On February 26, 1988, Humhosco submitted to HRS a letter of intent to apply for a certificate of need for open heart services at Humana Hospital Brandon. The letter of intent included a certificate dated February 26, 1988, authorizing Humhosco to file the application for the project estimated to cost nearly $2 million, making available "sufficient funds" for the project, certifying that Humhosco shall accomplish the project within the time allowable by law at or below the costs stated in the application, and certifying that Humhosco shall license and operate the facility. The certificate was signed by Alice F. Newton, as Secretary of Humana, Inc. She certified that the representations contained in the preceding paragraph were resolutions of the Board of Directors of Humana, Inc. approved on February 26, 1989. On or about March 14, 1988, Humhosco submitted to HRS an application for a certificate of need to install and operate an open heart center at Humana Hospital Brandon. The projected cost was about $1.9 million. The application included a certificate dated March 16, 1988, containing resolutions similar to those contained in the certificate of February 26, 1988. The certificate was again signed by Alice F. Newton, but this time in her capacity as Secretary of Humhosco. The resolutions, which were dated as of March 16, 1988, were adopted by the Board of Directors of Humhosco. The application contained no financial statement of Humhosco. Instead, the application contained an audited financial statement for "Humana Hospital- Brandon (a division of Humhosco, Inc., a wholly-owned subsidiary of Humana Inc.)." The financial statement, which was for fiscal year ending August 31, 1987, reflected an examination of the financial records of Humana Hospital Brandon, not Humhosco. The financial statement disclosed a shareholder's equity of about $24 million and net income of about $6.2 million based on net revenues of about $47 million and income before income taxes of about $12.2 million. The record does not explain the basis for a shareholder's equity in a division of the corporation in which it owns shares. However, nothing in the record suggests that the financial statement is mislabelled. The financial statement appears to reflect the operations and net worth of a division of Humhosco, not Humhosco itself. The financial statement is of little value in assessing the financial condition of Humhosco. Nothing in the record supports an inference that Humhosco's other hospitals, as well as any other operating assets that Humhosco might own, are profitable or, if unprofitable, whether their losses are exceeded by the profits of Humana Hospital Brandon. By letter dated April 14, 1988, HRS requested additional information from Humhosco. The letter requested, among other things, a financial statement for the prior year and an original certificate rather than a copy. HRS never commented on the fact that the certificate accompanying the letter of intent evidenced resolutions from the corporate parent of the applicant or that the financial statements were of a division of the applicant. By letter dated May 12, 1988, Humhosco responded to the above- described omissions letter. In its response, Humhosco provided the earlier financial statement, which was for Humana Hospital Brandon and not Humhosco. The letter did not include any material information regarding either certificate. By letter dated July 11, 1988, HRS informed Humhosco of its intent to issue Certificate of Need 5537 for the establishment of the open heart program described in the application. The accompanying State Agency Action Report, which was dated July 8, 1988, recommended that the certificate of need be issued in its entirety. The report stated that the need methodology described by Rule 10-5.011(1)(f) justified seven open heart programs in District VI, which has only six such programs, and the Humhosco proposal was in substantial compliance with all criteria. The Hospital Humana Hospital Brandon is a 220-bed general hospital in Brandon, which is in eastern Hillsborough County. Humana Hospital Brand on is fully accredited by the Joint Commission of the Accreditation of Health Care Organizations. The hospital, which is a Level II trauma center with eastern Hillsborough County as its catchment area, contains 16 intensive-care and cardiac-care beds and 35 progressive-care beds, in addition to its regular medical-surgery beds. The hospital offers a wide range of services, including medicine, pathology, anesthesiology, radiology, neurology, intensive care, and emergency care available at all times for cardiac emergencies. The hospital provides cardiac catheterization services through its cardiac catheterization lab and noninvasive cardiographics lab. Open heart surgery is cardiac surgery during which a cardiopulmonary bypass procedure is used. Cardiac catheterization is a diagnostic/therapeutic procedure used in connection with heart and circulatory conditions. Coronary angioplasty is the expansion of narrowed segments of the coronary vessels. The proposed open heart suite would be adjacent to the existing cardiac catheterization lab, and the two facilities would share the same recovery/support area. The proposed program would provide a wide range of procedures, including the repair or replacement of heart valves, repair of congenital heart defects, cardiac revascularization, repair or reconstruction of intrathoracic vessels, and the treatment of cardiac truama. The program would have the ability to implement and apply circulatory assist devices such as the intra- aortic balloon assist and prolonged cardiopulmonary partial bypass. Need District and State Health Plans The 1985 District VI Health Plan reports that most cardiac surgeries are open heart with the most common of these being coronary bypass surgery. The plan acknowledges that an important use of cardiac catheterization is evaluation for open heart surgery. According to the plan, open heart surgery, particularly coronary bypass surgery, has been controversial with respect to its risk- and cost- effectiveness and the fairness of its distribution among the entire population. Noting a decline in procedures in District VI from 1983 to 1984, the plan concluded that the application of the present rule methodology could exaggerate need if the decline continued. Otherwise, however, the proposed program satisfied the policies of the district plan broadly relating to need. The State Health Plan stated that an inverse relationship exists between the volume of open heart procedures and surgical death rates. The state plan added, however, that no clear agreement exists as to the minimum number of procedures necessary to maintain staff skills. The plan endorsed the rule requiring that a new program project a minimum of 200 procedures annually within three years of opening. The State Health Plan reported the controversy concerning the efficacy of open heart procedures, at least at their current rate. The plan concluded that further study would be required before the issue could be resolved. The plan stated that new types of cardiac catheterization procedures may replace some open heart surgery, "while necessitating the availability of open heart programs on standby basis within the same facility." The plan also anticipated a reduction in the rate of open heart surgery with the introduction of new procedures, such as balloon angioplasty, clot-dissolving substances, and calcium blockers. The plan noted the recommendations of two groups that cardiac catheterization laboratories be located only in facilities providing open heart surgery. The plan suggested that catheterization laboratories without connected open heart programs would suffer lower utilization rates than catheterization laboratories with open heart programs. The State Health Plan concluded by establishing an objective "to maintain an average of 350 open heart surgery procedures per program in each district through 1990." HRS Rules Rule 10-5.011(1)(f), Florida Administrative Code, sets forth the HRS numeric need methodology. Rule 10-5.011(1)(f)8 provides a formula to estimate the number of open heart procedures for the horizon year, which, in this case, is 1990. Rule 10-5.011(1)(f)11 prohibits the approval of new open heart programs unless certain conditions are met, including satisfying the requirement of Rule 10-5.011(1)(f)5.d that 200 procedures annually be performed within three years after commencement of the service. The proposed open heart program would generate a minimum of 200 adult open heart procedures annually within three years after commencement. Ultimately, the program could handle as many as 500 procedures annually. Under the formula contained in Rule 10-5.011(1)(f)8, the estimated number of open heart procedures in District VI is 2555 in 1990, which is when the proposed program would become operational. The projected population of District VI on January 1, 1990, is 1,563,354 persons. For the 12-month period ending two months prior to the deadline for letters of intent for the subject batching cycle, the use rate per 100,000 persons in District VI was 163.45. This figure is based on a population of 1,469,572 persons residing in District VI as of July 1, 1987, and 2402 open heart procedures performed during calendar year 1987. (The number of procedures includes 1050 procedures performed at Tampa General for the one-year period ending September 30, 1987, rather than calendar year 1987.) Rule 10-5.001(1)(f)11.b requires that the projected number of procedures in 1990 be divided by 350 in order to generate the number of programs needed to exist in 1990. The result of this calculation is that seven open heart programs are needed in District VI. That means that there is a net need for one program because there are presently six existing and approved open heart programs in District VI. However, Rule 10-5.011(1)(f)11.a.I prohibits the approval of any new open heart programs unless "each existing and approved" program is "operating at" and "expected to continue to operate at" a minimum of 350 adult open heart cases annually. The meaning of this rule is unclear, and HRS apparently interprets it merely to require that all existing programs average 350 procedures annually at the time of determination of the actual use rate. Another interpretation of the rule is that each existing and each approved program must be operating at the requisite rate before new programs could be approved. This interpretation is impractical because approved programs that are not yet in operation are not operating at any rate. If the intent of the rule were to prohibit the establishment of more than one open heart program at a time, HRS could have simply stated as much. The most likely interpretation is one that addresses the universally recognized relationship between volume of open heart procedures (up to a certain level) and patient mortality. The rule requires that each existing and approved facility in the district be operating at 350 procedures annually before new open heart programs are licensed. The rule does not authorize averaging the total number of procedures among the licensed facilities in a district. The inverse relationship between the number of procedures and surgical deaths is not dependent upon an average number of procedures performed in a geographical area. The safety of an open heart patient is dependent upon the actual number of open heart procedures being performed at the hospital that he or she has selected for open heart surgery. The presence in District VI of a hospital performing 1400 open heart procedures annually is of no relevance to the patient who has unwittingly selected a hospital in the same district that performs only, say, 50 such procedures annually. The six existing and approved open heart programs in District VI are identified below by facility, location, and numbers of procedures in 1987 and the first six months of 1988. Facility County 1987/1988 Procedures Tampa General Hillsborough 1050/714 St. Joseph's Hillsborough 887/514 University Community Hillsborough 0/0 Manatee Memorial Manatee 0/70 L. W. Blake Manatee 0/0 Lakeland Regional Polk 465/292 TOTAL DISTRICT VI PROCEDURES--1987 2402/1590 The 1988 procedures for Manatee Memorial cover the period of February, when the program became operational, through June. The State Agency Action Report indicates that Manatee Memorial is an approved but not yet existing program, although the program had already accounted for 70 procedures by the time of the report. The reason for this apparent discrepancy is that HRS uses the 1987 data used for calculating the use rate when determining the status of other programs. HRS offered little explanation of why it used 1987 data for determining in 1988 whether other programs were existing. Rule 10-5.011(1)(f), Florida Administrative Code, which covers open heart programs, does not define "approved and existing programs" or establish the time at which the status of a program should be determined. However, given the critical role of patient safety in the licensing process, the rule does not justify the reference to obsolete data. The Manatee Memorial open heart program was existing and approved at the time of the letter of intent and application of Humhosco and the State Agency Action Report. It was not then operating at 350 open heart procedures annually. Its approximate annualized rate of 168 procedures is materially below even the annual rate of 200 procedures often cited as the minimum number at which the mortality rate levels out. Additionally, there was no evidence that Manatee Memorial would attain such a volume of open heart procedures. Conclusions Regarding Need According to the numeric need methodology, exclusive of Rule 10- 5.011(1)(f)11.a.I, District VI could support an additional open heart program. Although in the long run the rate of open heart procedures may decrease for the reasons set forth above, the rate of such procedures will probably increase at least through 1990 and probably several years thereafter. For reasons set forth elsewhere in this recommended order, the Humana Hospital Brandon program would successfully satisfy this need. However, the requirement of Rule 10-5.011(1)(f)11.a.I has not been met, and thus need under the rule does not exist. Of the six current open heart programs in District VI, three performed no procedures in 1987. During the first six months of 1988, one of these three programs became operational, but the other two had yet to perform their first procedure. Although the first-year rate of procedures at Manatee Memorial was not insubstantial, the program is not operating at and expected to continue to operate at the minimum annual rate of 350 procedures set forth in the rule. The likelihood of the Manatee Memorial program attaining such a rate is especially difficult to predict in view of the unknown consequences of the initiation of another open heart program in Manatee County and another elsewhere in District VI. On balance, the proposed program at Humana Hospital Brandon is not needed or authorized due to the existing volume of procedures at Manatee Memorial as of the time of the application and approval and the adverse effect of reduced volumes upon patient safety. Rule 10-5.011(1)(f)11.a.I makes it clear that District VI needs time to absorb the recently approved open heart programs before a new one should be established. Quality of Care Humhosco has the ability to provide high quality of care and has done so in the past. An open heart program at Humana Hospital Brandon would improve the quality of care at the hospital. The new program would have limited effect upon the hospital's trauma services due to the limited number of trauma-related open heart procedures. However, the new program would complement the cardiac catheterization lab at the hospital. The addition of an open heart program would permit Humhosco to add cardiac angioplasty services in the cardiac catheterization lab at the hospital. Continuity of care and patient safety and convenience would be enhanced by the establishment of an open heart program at Humana Hospital Brandon. Strong physician support exists for an open heart program at Humana Hospital Brandon. Many existing staff persons already have the necessary skills and experience to participate in the open heart program. The staff includes 10 cardiovascular surgeons certified by the Medical Board of Thoracic Surgery or board-eligible for certification and three board-certified or board-eligible anesthesiologists trained in open heart surgery. Humhosco would add the additional staff needed to operate the proposed program. Humana Hospital Brandon has the capacity to accommodate the projected patient volume from the open heart program. Service Accessiblity Rule 10-5.011(1)(f)4.a provides that open heart programs shall be available within a maximum automobile travel time of two hours under average conditions for at least 90% of the district's population. The two-hour standard reflects the fact that open heart surgery is a tertiary service that is ordinarily performed on a scheduled rather than emergency basis. Hillsborough County is the largest county within District VI. The growth rate of eastern Hillsborough is higher than the growth rate of the remainder of the county. No open heart program is presently located in eastern Hillsborough County. A program at Humana Hospital Brandon would reduce the travel time for the persons living in eastern Hillsborough County. However, the two-hour standard is presently met in District VI, and the improvement in geographical access resulting from the establishment of a program at Humana Hospital Brandon is not substantial. The proposed program would satisfy the requirements of Rule 10- 5.011(1)(f)4.b and c regarding hours of operation and waiting periods. Humhosco has projected for the open heart program a payor mix of 55% Medicare, 2% Medicaid, and 5% indigent. If these projections were realized, Humhosco would achieve the objective of making open heart surgery available to these classifications of patients. Humhosco's record of serving these patient classifications at Humana Hospital Brandon suggests that these projected goals would be achieved. Financial Feasibility The immediate financial feasibility of the proposed project is good. The source of construction funds is a reasonable mix of 25% equity and 75% debt. The borrowed funds will come from Humana, Inc., which has ample resources to make a loan of this magnitude. The terms are 10 years at 12% with 120 equal monthly payments of $20,575.89 principal and interest. The availability of the equity portion of construction costs, which amounts to a little over $475,000, is uncertain due to the lack of information concerning the financial condition of the applicant. It is unlikely, however, that the unavailability of any or all of these funds would interfere with the project. Humana, Inc. has in any event committed by resolution to make available to the applicant sufficient funds to accomplish the project. The long-term financial feasibility of the proposed project is good. Even after total interest payments of about $168,000 and $158,000 in the first two years of operation, Humhosco projects, based on reasonable assumptions, that the open heart program would produce after-tax income of about $250,000 on first-year gross revenues of about $6.2 million and $345,000 on second-year gross revenues of about $7 million. Cost Effectiveness The implementation of an open heart program at Humana Hospital Brandon would encourage competition among health care providers of open heart services. Humhosco projects the average charge per open heart admission when the program would open in 1990 to be $29,000. This figure is about $3600 less than the average charge per open heart admission at Tampa General in 1987 and compares favorably with the charges of other providers in the area. In the long term, the effect of an open heart program at Humana Hospital Brandon could have an adverse effect on cost effectiveness if the program at Tampa General lost substantial volume due to the presence of this competition. Tampa General is a major provider of medical services to the medically indigent. Although publicly supported, Tampa General expends more on indigent-related costs than it receives in public funds for the medically indigent. Tampa General therefore must subsidize its unreimbursed indigent services with revenues from paying patients. In 1980, after a period of serious financial strains, Tampa General commenced a modernization program to attract paying patients. The program, together with a $160 million bond issue and new marketing efforts, has significantly improved the financial condition of the hospital. The approval in the past of new open heart programs in the area has coincided with the reduction of open heart procedures at Tampa General. In fiscal year ending 1983, Tampa General performed 1671 procedures. The following year, during which St. Joseph's began performing open heart surgery, Tampa General performed 878 procedures. In fiscal year ending 1985, Tampa General performed 802 procedures. The following two years, during which no new programs became operational, Tampa General performed 1050 and 1428 (projected) procedures, respectively. Undoubtedly, a new open heart program at Humana Hospital Brandon would have some effect on existing programs, including that at Tampa General. However, the record does not support a finding that the establishment of an open heart program at Humana Hospital Brandon would have a more lasting effect upon the program at Tampa General than did the other programs established in recent years. Other Factors The record does not demonstrate that there are less costly, more efficient, or more appropriate alternatives to the in-patient services proposed in the subject application. With one exception, existing in-patient facilities providing open heart services are being used in an appropriate and efficient manner. The exception is that there is nothing in the record to suggest that the open heart programs at Manatee Memorial, University Community, and L. W. Blake are being utilized efficiently. To the contrary, the only program in existence at the time of the application was not operating at the optimal minimum level. The costs and methods of proposed construction are reasonable and appropriate. There is nothing in the record to suggest that practical alternatives exist to the construction program contemplated by Humhosco. Open heart patients will not experience serious problems in obtaining in-patient care if the proposed application is not approved. There is nothing in the record to suggest that joint, cooperative, or shared resources could be used to provide the open heart services for which Humhosco has applied. The proposed program would not have any significant effect on research and educational facilities or health professional training programs.
Recommendation Based on the foregoing, it is RECOMMENDED that a Final Order be entered dismissing the petition of University Community Hospital in Case No. 88-4366 on the grounds that it dismissed its petition, and denying the application of Humhosco for Certificate of Need 5537. DONE and ENTERED this 18th day of April, 1989, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of April, 1989. APPENDIX Treatment Accorded proposed Findings of Humhosco and HRS 1-29. Adopted or adopted in substance. 30. Rejected as against greater weight of the evidence to the extent that the requirement of 350 procedures at each facility is part of the numeric need methodology. 31 and 33. Adopted in substance. However, the resulting determination of need or no need is tentative. Rule 10-5.011(1)(f)11 provides a general prohibition against the establishment of programs under normal circumstances even though, under the other portions of the rules, there would otherwise be a numeric need. 32. Adopted. Rejected as legal argument. To the extent factual, rejected as against the greater weight of the evidence. Adopted in substance. Rejected as unnecessary. 37-38. Rejected as subordinate. Adopted in substance at least as to the maintenance or slight increase of the present use rate for the immediate future. This fact does not justify a deviation from the rule requirement of the historic use rate, which in any event would justify another program. Nor does this fact justify a not normal condition for the reasons set forth in the recommended order. It should be noted that Humhosco did not offer evidence to this effect at the hearing for either of these improper purposes. This fact is only relevant in assessing the impact of the establishment of the proposed project upon existing providers, especially Tampa General and, to a lesser extent due to the greater amount of speculation involved, the new providers such as Manatee Memorial. Rejected as unsupported by the greater weight of the evidence. An increase in the number of programs has historically been accompanied by an increase in the number of procedures. It is conjecture whether or to what degree the addition of programs caused such an increase. 41-45. Adopted in substance. 46-48. Rejected as subordinate. 49-52. Adopted or adopted in substance. 53-55 and 60. Rejected as legal argument. 56-58 and 61. Adopted or adopted in substance. 59. Rejected as recitation of evidence. 62-64. Rejected as subordinate. 65. Rejected as legal argument. 66-69. Adopted. 70 and 72. Rejected as unsupported by the greater weight of the evidence. 71. Rejected as irrelevant. 73-76. Rejected as subordinate. Concerning the "overcrowded" conditions at Tampa General, the evidence showed only that the Tampa General program was, at times, quite busy, but not overutilized. The periodic high level activity at Tampa General is subordinate to the findings in the recommended order concerning the limited impact upon Tampa General of the approval of the proposed project. 77. Adopted in substance. 78-82. Rejected as subordinate. 83. Adopted in substance. 84-86. Rejected -as subordinate. Rejected as unsupported by the greater weight of the evidence. The proposed payor mix is reasonable insofar as providing access to the medically indigent and Medicaid patients. The record is unclear, however, that the approval of the application would improve the existing access of such patients to open heart services. Adopted in substance. 89 and 91. Rejected as subordinate. 90. Adopted, except that the last sentence is rejected to the extent that it suggests that Humhosco's commitment to financial access is greater than the commitment of existing providers. 92-94. Adopted. 95-96. Rejected as irrelevant. A hospital has no financial strength. A lender or investor assesses the legal entity that owns or operates the hospital. The net worth and profitability of the hospital may have a material impact on the net worth and profitability of the owner or operator of the hospital. However, it is impossible to make that determination without assessing the assets, liabilities, profits, and losses of the legal entity and not simply one of its assets. The immediate financial feasibility may be inferred by the activity of Humana, Inc. with respect to the proposed project. Rejected as legal argument. Adopted in substance. 99-100 and 108. Adopted. 101-107. Rejected as subordinate and cumulative. 109 and 123. Rejected as legal argument. 111-122. Adopted in substance. 123. Rejected as legal argument. and 126. Adopted. and 127-128. Rejected as subordinate. Adopted in substance. Rejected as cumulative. 131-133. Rejected as cumulative and, for the purpose offered, irrelevant. 134-137. Adopted in substance. 138-150. Rejected as subordinate. Treatment of Proposed Findings of Tampa General 1-3. Adopted. Rejected as legal argument and, as to the policy of HRS, irrelevant insofar as such policy might deviate from the clear requirements of the statute. First two sentence rejected as legal argument. Remainder adopted. 6-7. Rejected as legal argument except that last sentence of Paragraph 7 is adopted. First two sentences adopted. Remainder rejected as irrelevant. Adopted in substance. 10-11. Adopted. 12. Rejected as legal argument and, to the extent factual, against the greater weight of the evidence. 13-14. Adopted in substance. 15-16. Rejected as unnecessary. 17. Rejected as against the greater weight of the evidence. 18-20. Adopted in substance. Adopted insofar as Humhosco provides quality cardiac care services at Humana Hospital Brandon without an open heart program. Remainder rejected as against the greater weight of the evidence. Rejected insofar as the proposed finding suggests that a slight improvement in geographic accessibility should, as a matter of law, be ignored in this case. Adopted in substance if, like the proposed finding in Paragraph 19 concerning trauma-center status, this proposed finding means only that the slight improvement in geographic accessibility is alone insufficient to justify granting the certificate of need. Rejected as subordinate. 24-25. Rejected as recitation of evidence and subordinate. Rejected as unsupported by the greater weight of the evidence. Adopted. 28-29. Adopted in substance. Rejected as irrelevant given the interpretation adopted in the recommended order concerning the meaning of Rule 10-5.011(1)(f)11.a.I. Adopted in substance. 32-33. Rejected as unsupported by the greater weight of the evidence. 34. Rejected as subordinate. 35-40. Rejected as unsupported by the greater weight of the evidence. 41-42. Rejected as unsupported by the greater weight of the evidence and subordinate. Treatment Accorded proposed Findings of St. Joseph's 1-4. Adopted or adopted in substance. First sentence adopted except that the tax status of Humhosco as a "holding company" is rejected as a legal conclusion, irrelevant, and unsupported by the greater weight of the evidence. Second sentence adopted. Third sentence rejected as irrelevant. Third sentence rejected as a legal conclusion, irrelevant, and unsupported by the greater weight of the evidence, although it appears to be true that the identities of the persons occupying the named positions are the same between the two companies. Last sentence rejected as irrelevant. Adopted. Rejected as irrelevant. Adopted. Rejected as irrelevant. 10-13. Rejected as legal argument and unnecessary, given the finding in the recommended order that, even ignoring the additional beds that have been approved at Humana Hospital Brandon, the hospital is not overutilized. 14-15 and 17 and 19. Rejected as legal argument. 16. Rejected as subordinate. 18. Adopted in part and rejected in part. The existence of a cardiac catheterization lab does not mandate the authorization of an open heart program. However, the record in this case supports the finding that the addition of an open heart program would complement existing services in the cardiac catheterization lab, and nothing in the law prohibits the consideration of such a factor. 20-21. Rejected as irrelevant. See Paragraph 18 above. Rejected as irrelevant. Rejected as legal argument. Rejected as unsupported by the evidence. 25-26. Rejected as subordinate to the finding contained in the recommended order that the status as a trauma center is not a significant factor in considering the subject application. 27-28. Rejected as legal argument. 29-30. Adopted in substance. 31-33. Rejected as recitation of evidence. 34. Rejected as against the greater weight of the evidence. 35-39. Rejected as subordinate. 40. Adopted in substance. 41-49. Rejected as subordinate. 50. Rejected as irrelevant. 51-52. Rejected as against the greater weight of the evidence. 53-55. Rejected as subordinate. 56. Rejected as legal argument. 57-58. Rejected as recitation of testimony. Rejected as legal argument. Adopted. 61-69. Rejected as unnecessary. Rejected as legal argument. Adopted except that the last sentence is rejected as legal argument. Rejected as legal argument. Rejected as recitation of testimony. Rejected as legal argument. Adopted in substance. 76-78. Rejected as recitation of evidence. COPIES FURNISHED: Ivan Wood, Esquire Sam Power Wood, Lucksinger & Epstein Clerk Four Houston Center Department of Health and 1221 Lamar, Suite 1440 Rehabilitative Services Houston, TX 77010 1323 Winewood Boulevard Tallahassee, FL 32399-0700 John Radey, Esquire Elizabeth McArthur, Esquire Gregory L. Coler Aurell, Fons, Radey & Hinkle Secretary Post Office Drawer 11307 Department of Health and Tallahassee, FL 32302 Rehabilitative Services Tallahassee, FL 32399-0700 Cynthia S. Tunnicliff, Esquire Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A. John Miller Drawer 190 General Counsel Tallahassee, FL 32302 Department of Health and Rehabilitative Services 1323 Winewood Boulevard John Rodriguez, Esquire Tallahassee, FL 32399-0700 Assistant General Counsel 2727 Mahan Drive Fort Knox Executive Center Tallahassee, FL 32308 James C. Hauser, Esquire Joy Thomas, Esquire Messer, Vickers, Caparello, French and Madsen, P.A. Post Office Box 1876 Tallahassee, FL 32302 =================================================================
The Issue Whether the adult open heart surgery rule in effect at the time the certificate of need (CON) applications were filed, and until January 24, 2002, or the rule as amended on that date is applicable to this case. Which, if any, of the applications filed by Martin Memorial Medical Center, Inc. (Martin Memorial); Bethesda Healthcare System, Inc., d/b/a Bethesda Memorial Hospital (Bethesda); and Boca Raton Community Hospital, Inc. (BRCH) meet the requirements for a CON to establish an adult open heart surgery program in Agency for Health Care Administration (AHCA) Health Planning District 9, for Okeechobee, Indian River, St. Lucie, Martin, and Palm Beach Counties, Florida.
Findings Of Fact The Agency for Health Care Administration (AHCA) is the agency which administers the certificate of need (CON) program for health care facilities and programs in Florida. It is also the designated state health planning agency. See Subsection 408.034(1), Florida Statutes. For health planning purposes, AHCA District 9 includes Indian River, Okeechobee, St. Lucie, Martin, and Palm Beach Counties. See Subsection 408.032(5), Florida Statutes. AHCA published a fixed need pool of zero for additional open heart surgery programs in District 9, for the January 2002, planning horizon. The mathematical need formula in the rule, using the use rate for open heart surgery procedures in the district as applied to the projected population growth, indicated a gross numeric need for 7.9 programs in District 9. After rounding off the decimal and subtracting four, for the number of existing District 9 open heart surgery programs, the formula showed a numerical need for four additional ones. The need number defaulted to zero, however, because one of the existing programs, at Lawnwood Medical Center, Inc., d/b/a Lawnwood Regional Medical Center (Lawnwood), had not reached the required minimum of 350 surgeries a year, or 29 cases a month for 12 months prior to the quarter in which need was published. Having initiated services in March 1999, the Lawnwood program had not been operational for 12 months at the time the applications were filed in October 1999. The other existing providers of adult open heart services in District 9, in addition to Lawnwood, are Palm Beach Gardens Community Hospital, Inc., d/b/a Palm Beach Gardens Medical Center (PBGMC); Columbia/JFK Medical Center Limited Partnership, d/b/a JFK Medical Center (JFK); and Tenet Healthsystem Hospitals, Inc., d/b/a Delray Medical Center (Delray). All are intervening parties to this proceeding. In the Pre-Hearing Stipulation, the parties agreed that the Intervenors have standing to participate in this proceeding. Despite the publication of zero numeric need, five hospitals in District 9 applied for CONs to establish new adult open heart programs asserting need based on not normal circumstances. Three of those applications are at issue in this case: CON Number 9249 filed by Martin Memorial Medical Center, Inc. (Martin Memorial); CON Number 9250 by Bethesda Healthcare System, Inc., d/b/a Bethesda Memorial Hospital (Bethesda); and CON Number 9248 by Boca Raton Community Hospital, Inc. (BRCH). AHCA initially reviewed and denied all of the applications. After changing its position before the final hearing, AHCA supports the approval of the applications filed by Martin Memorial and BRCH. Martin Memorial Martin Memorial, the only hospital in Martin County, and the only party/applicant not located in Palm Beach County, operates two facilities, a total of 336 beds, on two separate campuses under a single license. The larger hospital, in Stuart, has 236 beds and is located approximately 20 miles south of Lawnwood and 30 miles north of PBGMC. Martin Memorial owns and maintains, at the hospital, its own ambulance service used exclusively for hospital-to-hospital transfers. The drive from Martin Memorial to Lawnwood averages 38 minutes. The drive time to PBGMC averages 48 minutes. By helicopter, it takes 11 or 12 minutes to get from Martin Memorial to PBGMC. The remaining 100 Martin Memorial Hospital beds are located on its southern campus, approximately six miles south of the Stuart facility. Martin Memorial is a private not-for-profit hospital, established in 1939. The parent corporation also operates an ambulatory care center, physician group, billing and collection company, and a foundation. Martin Memorial is applying to operate an open heart program at its Stuart location, where it currently offers cardiology, hematology, nephrology, pulmonary, infectious disease, pathology, blood bank, anesthesiology, diagnostic nuclear medicine, and intensive care services. Martin Memorial has a 25-bed telemetry unit, a 14-bed medical intensive care unit, a nine-bed surgical intensive care unit, and a 22-bed progressive care unit, with an identically equipped 16-bed overflow unit used only for high seasonal occupancy, from approximately December to April. If its CON is approved, Martin Memorial will dedicate four surgical intensive care unit beds and six progressive care beds for post-open heart surgery patients. Martin Memorial agreed to condition its CON on the provision of 2.4% of the project's gross revenues for charity care and 2% for Medicaid. The total estimated project cost is $6.5 million. Martin Memorial intends to affiliate with the University of Florida and its teaching facility, Shands Hospital, to assist in establishing the program and training staff. The cardiovascular surgeon is expected to be a full-time faculty member who will live and work in Martin County. Although initially opposed, AHCA now supports Martin Memorial’s application primarily because (1) it has the largest cardiac catheterization (cath) program at any hospital in this state which does not also provide open heart services; (2) it has a medium size and growing Medicare population, which constitutes the age group most likely to require open heart surgery and related services; (3) Martin County residents now must receive open heart and related services at hospitals outside Martin County, primarily in areas ranging from Palm Beach County south to Dade County; (4) emergency heart attack patients who present at Martin Memorial-Stuart could receive primary angioplasties without transfer; and (5) it is a not-for-profit hospital, while all of the existing open heart providers in the District are for- profit corporate subsidiaries. Of the applicants, Martin Memorial is also located the greatest distance from the existing providers. Bethesda Memorial Bethesda has 362 licensed beds located in Boynton Beach. JFK is nine miles north or an average drive of 18 minutes from Bethesda. Delray is nine miles south or an average drive of 17 minutes from Bethesda. Established in February 1959, Bethesda is a not-for- profit subsidiary of Bethesda Health Care Systems, Inc., which also operates some for-profit subsidiaries, including Bethesda Medical/Surgical Specialists, Bethesda Management Services, and Bethesda Comprehensive Cancer Institute. Bethesda is a disproportionate share provider of Medicaid and Medicare services. The services currently available at Bethesda include obstetrics, Level II and III neonatal intensive care, cardiology, orthopedics, pediatrics, neurological and stroke care, peripheral vascular surgery, wound care, pulmonary and infectious disease care. Bethesda recently eliminated a 20-bed unit for adult psychiatric services, and a 20-bed skilled nursing unit. Currently, at Bethesda, the sickest patients are placed in a 10-bed critical care unit. The hospital also operates a 12- bed surgical intensive care unit, an eight-bed medical intensive care unit, and 30 and 25-bed telemetry units. Bethesda was planning to open a 20-bed extension to the telemetry unit, all in private rooms, in January 2002. If an open heart surgery program is established, Bethesda, will add an eight-bed cardiovascular intensive care unit to care post-operatively for the patients. Bethesda offered to condition its CON on the provision of 3% of total open heart surgeries to Medicaid and 3% of total open heart surgeries to indigent patients. Bethesda's estimated total project cost is $4 million, $1.7 million for equipment, and $2.24 for construction. Bethesda will receive assistance from Orlando Regional Medical Center in training personnel and developing protocols for an open heart program. At Orlando Regional, a statutory teaching hospital, the number of open heart cases ranges from 1,300 to 1,600 a year. Bethesda has a contract with a physicians' group to provide a board-certified cardiovascular surgeon to serve as medical director for the open heart program. AHCA’s position is that the Bethesda application is "approvable" but, of the Palm Beach County applicants, less desirable than that of BRCH. By contrast, Bethesda's experts emphasized (1) the absence of any overlap with the Lawnwood market; (2) the greater need for a new program, based on the volume of cases, in Palm Beach County than elsewhere in the District; (3) the size, growth, and age of the population within Bethesda's market area, and (4) the ability of Bethesda to enhance access for underserved groups, particularly Medicaid patients. Boca Raton Community Hospital BRCH is licensed for 394 beds. Located in southern Palm Beach County, close to the Broward County line, BRCH is from eight to nine miles south of Delray and approximately 15 miles north of North Ridge Medical Center (North Ridge), in adjacent Broward County. On average, the drive from BRCH to Delray takes 20 minutes. The drive from BRCH to North Ridge takes about 25 minutes. Founded in the late 1960's, BRCH operates as a not-for- profit corporation. BRCH has a staff of 750 physicians and 1,600 employees. Services at BRCH include cardiology, a 10-bed Level II neonatal intensive care unit, hematology, nephrology, pulmonology, radiology, nuclear medicine, and neurology. If approved and issued a CON for adult open heart surgery, BRCH will build a new facility for the program, including two new cath labs, an electrophysiology lab and 12 intensive care beds. In the CON, the estimated construction cost was $16.5 million and the estimated equipment cost was $2.7 million of the $20 million estimated for the total project. BRCH agreed to having conditions on its CON (1) to provide 5% of open heart cases in year two to uninsured patients, (2) to establish an outreach program to increase the utilization of open heart services among the uninsured, and (3) to relinquish the CON if it fails to perform at least 350 open heart surgery procedures a year in any two consecutive years after the end of the second year of operations. AHCA determined that it should change its initial position opposing the approval of the BRCH application to one of approval because of (1) the large Medicare population in the service area; (2) the volume of emergency room heart attack patients; (3) the district out-migration for services primarily to North Ridge; (4) the large, well-developed interventional cardiology program; and (5) the not-for-profit organizational structure. When AHCA decided to support the approval of the BRCH application, it did so, in part, based on erroneous data. The cath lab volume was assumed to be approximately 1,800 caths a year, as compared to the actual volume of 667 caths for the year ending March 2001. Having considered the corrected data, AHCA’s expert described BRCH’s application as significantly less compelling, but still preferable to that of Bethesda. BRCH is the largest hospital in number of beds in Florida which does not have an open heart surgery program. AHCA also responded favorably to identified "cultural" access issues, described as underservice to demographic groups, based on race, gender, and class. BRCH presented a plan to equip a mobile unit to provide diagnostic screenings and primary care in underserved areas. Pre-Hearing Stipulations The parties stipulated that all of the applications met the statutory requirements concerning the application content and filing procedures of Sections 408.037 and 408.039, Florida Statutes (1999), and Rule 59C-1.033, Florida Administrative Code. Martin Memorial, Bethesda, and BRCH have a history of providing quality care. See Subsection 408.035(1)(c), Florida Statutes (1999). There are no existing outpatient, ambulatory or home care services which can be used as alternatives to inpatient adult open heart and angioplasty services. See Subsection 408.035(1)(d), Florida Statutes (1999). Martin Memorial and Bethesda have sufficient available funds for capital and operating expenses required for their proposed open heart surgery programs. See Subsection 408.035(1)(h), Florida Statutes (1999). Martin Memorial complied with the requirements related to costs and methods of construction, and equipment for the proposed project. Except for the contention that it omitted $1,687,180 in fixed equipment costs and that the proposed construction project is excessively large and expensive, the parties stipulated that BRCH reasonably estimated construction and equipment costs, including costs and methods of energy provision. See Subsection 408.035(1)(m), Florida Statutes (1999). The parties agreed that Subsections 408.035(1)(p), and 408.035(2)(e), Florida Statutes, related to nursing home beds, are not at issue at in this proceeding. If Bethesda, BRCH, and Martin Memorial can recruit the necessary, competent nursing and surgical staff, they will meet the requirements of Rule 59C-1.033(3), (4)(b), (4)(c), and (5)(c), Florida Administrative Code. Adult open heart surgery services are currently available to District 9 residents within the two-hour travel standard of Rule 59C-1.033(4)(a), Florida Administrative Code. Bethesda, BRCH, and Martin Memorial are accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), assuring quality as required by Rule 59C-1.033(5)(a), Florida Administrative Code. The parties agreed that if Bethesda, BRCH, and Martin Memorial can recruit the necessary nursing and surgical personnel, their programs would meet the requirements of Rule 59C-1.033(4)(b), (4)(c), (5)(b), and (5)(c), Florida Administrative Code, except that JFK and Lawnwood did not agree that the applicants satisfied the requirements related to cardiovascular surgeons. Martin Memorial will be able to obtain perfusionist services, as required by Rule 59C-1.033(5)(b)5, Florida Administrative Code. Bethesda and BRCH projected reasonable staffing patterns, in their CON schedules 6A, given projected census levels, although the ability to recruit staff and adequacy of projected salaries are at issue. The rule criteria related to pediatric open heart surgery are not applicable to this proceeding. Disputed Statutory and Rule Criteria The following statutory criteria and applicable in this case: Subsections 408.035(1)(a), (b), (c) - for comparison; (e), (f), (g), (h) - related to funding for BRCH, and related to staff recruitment and salaries; (i), (j), (k), (l), (m) - for Bethesda, and related to the size, scope, and fixed equipment cost for BRCH, (n), and (o); and Subsections 408.035(2)(a), (b), (c), and (d), Florida Statutes. The criteria in Rules 59C-1.030, and of Rule 59C-1.033(5)(b) - related to staffing, except as stipulated - are at issue. The parties have also raised the issue of whether AHCA is consistent in applying its agency rules related to open heart cases. The District 9 health plan contains two preferences for open heart applicant hospitals, the first for hospitals with established cardiac cath programs, the second for applicants with a documented commitment to serve patients regardless of their ability to pay or county of residence. All of the applicants have established diagnostic cardiac cath programs and related cardiology services. During the cardiac cath procedure, a catheter is inserted into a cardiac chamber to diagnose heart disease. During a therapeutic cardiac cath procedure, or angioplasty, the catheter with a balloon-tip is inserted into a coronary artery and inflated to open blockages. The latter requires open heart surgery back-up in case a vessel is ruptured and thus, an open heart surgery certificate of need. Martin Memorial operates the largest cardiac cath program at a hospital in Florida which does not also offer open heart surgery. At Martin Memorial, 1,885 inpatient and outpatient caths were performed in 1999, 1,770 in 2000, and 1,286 in the first nine months of 2001. Cardiac caths are only performed at the Stuart facility. Non-invasive cardiology services began in the 1970's at Martin Memorial. A CON to establish the first cardiac cath lab was issued in 1989, and a second, CON-exempt cath lab opened in 1998. Martin Memorial also offers pacemaker implants and peripheral angioplasties to eliminate clots in other areas of the body, for example, in the legs, electrocardiography, echocardiography, stress tests, and cardiac rehabilitation. Neither electrophysiology studies nor defibrillator implants are performed at Martin Memorial. Martin Memorial has an open staff of cardiologists, meaning that its cath lab is available for use by any of the invasive cardiologists on staff. The facilities include two cardiac cath procedure rooms, a control room for the laboratory, a five-bed holding room and a two-bay inpatient recovery area. Bethesda also has an established cardiac cath program with an open staff. Seventeen cathing physicians were listed on the Bethesda roster for the month of March 2001. Of those, five were also the only cardiologists allowed to perform caths at the closed lab at JFK. Some of these cardiologists are permitted to perform emergency angioplasties at Bethesda. Bethesda has, at least, two cardiovascular surgeons on staff. From 1995 to 1998, the volume of cardiac caths at Bethesda increased over 60%, from 133 to 213. For the 12 months ending August 31, 2000, Bethesda cardiologists performed 428 caths. For the 12 months ending September 30, 2001, the cath volume was 506 cases. Currently, cath procedures at Bethesda are performed in one lab with recently upgraded digital equipment. As part of the planned expansion of the hospital, the existing lab will be relocated and a second one added. Permanent pacemakers are implanted at Bethesda, but internal cardioverter defibrillator procedures, electrophysiology, and table studies are not performed. Cardiac cath services, at BRCH, started in 1987. Two cath labs with state-of-the-art digital equipment are used. In the 12 months ending March 31, 2001, there were 667 inpatient and outpatient caths performed at BRCH. Currently, cardiac services at BRCH are the largest source of admissions, approximately 20% of total admissions. The available services include echocardiography, tilt table studies, electrocardiography, stress tests, cardiac wellness and rehabilitation programs, electrophysiology studies, and internal cardioverter defibrillator implants. Each year, one or two "rescue" or salvage angioplasties are performed in extreme, life- threatening circumstances at BRCH. Forty-nine cardiologists are on the closed "invitation-only" medical staff at BRCH, 47 are board-certified and approximately half are invasive cardiologists. The staff also includes seven electrophysiologists, five of whom are board-certified, and seven thoracic surgeons, five of whom perform open heart surgeries at other hospitals. For the first two years of operating an open heart program, BRCH intends to have a closed program, by virtue of an exclusive contract with a single group of cardiovascular surgeons. Subsection 408.035(1)(a) - district health plan preference for serving patients regardless of county of residence or ability to pay; and Subsection 408.035 (1)(n) - history of and proposed services to Medicaid and indigent patients Martin Memorial, Bethesda, and BRCH will serve patients regardless of residence and, they contend, will enhance access for Medicaid, indigent, charity and/or self-pay patients. Each applicant has offered to care for patients in some of these categories as a condition for CON approval. The proposed conditions, are, for Martin Memorial, 2.4% of total project revenues for charity and 2% of admissions for Medicaid patients. Martin Memorial provides a number of services without charge, including follow-up education to former inpatients to assist them in managing diseases such as asthma, diabetes, congestive heart failure and chronic obstructive pulmonary disease. Obstetric care includes one free home visit by a nurse/midwife to check the health of newborns and mothers. Office space is provided for a free clinic for the "working poor" of Martin County, which receives approximately 10,000 annual visits from a patient base of about 2,000 patients. Over $100,000 a year is provided for an indigent pharmacy program. Combining the outreach services with other charitable contributions, including charity care, Martin Memorial valued "community benefits" at $24 million in 1998, $30.5 million in 2000. When Martin Memorial received an inpatient cardiac cath CON, it agreed to provide a minimum of 2.5% of total cardiac caths to Medicaid patients and 3% to charity care. Due to changes in state regulation, Medicaid and charity care for cardiac caths no longer needs to be reported to the state. That data, representing as it does, the base of patients from which open heart cases will come, is useful in evaluating Martin Memorial's projections. In 1999, seven-tenths of one percent of the patients in Martin Memorial's cath lab were Medicaid and four-tenths of one percent were indigent. In 2000, seven-tenths of one percent were Medicaid and two-tenths of one percent were indigent. Martin's cath lab data indicates that its projected open heart levels of Medicaid and indigent care are not attainable. Bethesda offered a commitment to provide 3% of total open heart cases for Medicaid patients and 3% to indigent patients annually. Historically, Bethesda has cared for a relatively large number of Medicaid, minority, and indigent patients. It is recognized as a disproportionate share provider of Medicaid care under the Florida program and of Medicare under the Federal program. The Palm Beach County Health Department provides approximately $1 million a year to Bethesda for charity care. As a percentage of gross revenue, Bethesda provided 8.8% Medicaid and 3.46% charity care in 1999. Approximately 54% of the charity care is attributable to obstetrics and pediatric services. Bethesda's younger patient base and the number of adult open heart Medicaid cases from Bethesda's service area, 2.4% or 7 cases in the year ending September 2000, raise the issue of its ability to generate sufficient cases to meet the proposed commitment. In 1995, 20 of the 36 total resident Medicaid open heart surgeries were performed at the three providers in District 9, Delray, JFK, and PBGMC. In 1999, when Lawnwood began open heart care, the Medicaid volume at the District providers increased to 51 of the 64 total Medicaid resident cases. In 2000, the four programs treated a net number of 56 of 60 resident Medicaid cases. A program at Bethesda also could reasonably be expected to increase the number of Medicaid and charity cases performed in the District, in volume and by reversing outmigration, but the patients must come from a base of patients with cardiac diagnoses. For the year ending September 2000, in Bethesda's service area, 4.9% of cardiac patients were Medicaid and charity patients combined, 1.6% Medicaid and 3.3% charity. Assuming that the same proportions could be maintained for open heart surgeries, Bethesda cannot achieve 3% Medicaid and, although unlikely, has a chance of reaching 3% charity only in the best case scenario. If approved, BRCH commits to providing 5% of total OHS in the second year to uninsured patients and to establish an outreach program to increase utilization by uninsured patients. BRCH has, over the past three and a half years, established outreach programs, which include having nurses and social workers in schools, providing free physical examinations to children who do not have primary care doctors, and performing echocardiograms for high school athletes, equipping police and fire rescue units with portable defibrillators, and operating mobile units for mammography screenings and vans to transport patients to and from their homes for hospital care. A free dental screening program is operated in conjunction with Nova Southeastern University. BRCH also operates a family medical center approximately seven miles west of the hospital. Recently, the Foundation for BRCH purchased, for $1.8 million, a large bus to equip as a mobile clinic. The mobile diagnostic unit is intended to reach uninsured patients to provide primary care and ultimately open heart surgery care to those who might not otherwise be screened, diagnosed and referred. No information was available and no decisions had been made about the staff and equipment, or service areas for use of the van. Because of the lack of more specific plans, it is impossible to determine whether the outreach effort has any reasonable prospects for success in meeting any unmet need. For the years ending June 1996, 1997, and 1998, BRCH provided six-tenths of one percent, and five-tenths of one percent of gross revenues for charity care. In 2000, BRCH provided one-half of one percent for charity care and, in 2001, twenty-seventh hundreds of a percent. The historical levels do not support the proposed commitment of 5% of open heart surgeries for uninsured patients in the second year of the program. Although worded to apply only to the second year, BRCH's President and CEO testified concerning the condition without limiting it to the second year. In Boca Raton Community Hospital, Inc.'s Proposed Recommended Order (Reformatted), filed on July 5, 2002, the condition is described as follows: 49. As conditions of CON approval, Boca will, beginning in the second year of operation of the program and continuing thereafter, provide a minimum of five percent each year of OHS cases to uninsured patients, and establish an outreach program to locate and provide OHS and cardiology services to uninsured patients in Palm Beach County. (Boca Ex. 3 at Schedule C; Pierce, 1899). Boca reasonably decided to focus on the needs of the uninsured, rather than Medicaid patients, because of the low volume of Medicaid patients who require OHS services. (Pierce, 1902). At BRCH, Medicaid and Medicaid health maintenance organization (HMO) care as a percent of total ranged from 1.3% to 1.4% from 1996 through 1998. BRCH projected serving 1.2% to 1.3% open heart Medicaid cases, or four patients in the first year and 1.5% to 1.6%, or seven Medicaid patients in the second year. The projections are consistent with its history although BRCH offered no Medicaid condition. Bethesda and BRCH also claimed not normal circumstances exist in District 9 due to the disparity in open heart care for uninsured and Medicaid patients as compared to the insured. For uninsured residents of Palm Beach County during the twelve months ending June 30, 2000, the use rate was 4.7 per 1000, as compared to 21.8 per 1,000 for insured open heart patients. For angioplasty patients, the insured use rate was 38.2, but the uninsured rate was only 8.9. Assuming that the use rates should not be so different, the discrepancy in access for the uninsured is significant and unfortunate but was not shown to be a not normal circumstance in the health care delivery system. The applicants' proposals, unlikely as they are to meet even the proposed conditions, are inadequate to increase access materially for the uninsured. Comparisons of the level of Medicaid provided statewide to that provided in District 9 without consideration of other factors, including age and income levels, were not useful in analyzing access. Assertions that any discrepancy in care for potential Medicaid open heart patients constitutes a not normal circumstance are not substantiated by this evidence. Subsection 408.035(1)(b) and (2)(b) - availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing facilities in District Nine In 2006, the population in District 9 is projected to reach 1.2 million people, of which approximately 992,378 will reside in Palm Beach County, 119,573 in Martin County, 181,406 in St. Lucie County, 106,790 in Indian River County, and 31,140 in Okeechobee County. In District 9, throughout Florida, and in the United States, heart disease is the leading cause of death. In 2000, heart disease was the cause in 522 of 1,560 total deaths in Martin County, and 4,337 of 12,795 total deaths in Palm Beach County. From 1995 to 2000, the number of Florida residents having open heart surgeries increased 15.1%. During the same period of time, the number of District 9 resident cases, regardless of where the surgeries were performed, increased from 3,119, to 3,938, an increase of 755 OHS cases, or 24%. Palm Beach County residents represented 427 of the 755 increase, and 2,633 of the total of 3,938 resident cases. The distribution of the remaining 1,305 District resident cases by county was as follows: 597 from St. Lucie, 339 from Martin, 269 from Indian River, and 100 from Okeechobee County. More recent data, however, indicates trends towards a leveling off or even decline in the number, but an increase in the complexity of open heart procedures. Some experts describe open heart volumes having reached a "plateau" in the United States, in Florida, and in District 9. Last year, the number of open heart surgeries in the United States declined 22%. The statewide volume of cases was 32,199 in 1996, 33,507 in 1997, 34,013 in 1998, and 32,097 in 1999. At District 9 hospitals, open heart volumes were 1,670 in 1994, 1,841 in 1995, 2,152 in 1996, 2,407 in 1997, 2,527 in 1998, 2,656 in 1999, and 2,650 in 2000. Cardiac Catheterizations and Angioplasties The major reason given for the stable and declining open heart volume is the increase in the utilization of angioplasty, or therapeutic cardiac cathing, an alternative which costs less and is less invasive. Angioplasty procedures increased from 1995-2000, by over 2,500 cases for District 9 residents, and over 2,600 cases in District 9 hospitals, from 2,104 cases in 1995, to 4,714 in 2000. Among the procedures generally referred to as angioplasties are percutaneous transluminal angioplasty (PTCA) or balloon angioplasty, percutaneous transluminal coronary rotational atherectomy (PTCRA), and the insertion of scaffolding- like devices, called stents, to prevent re-occlusion of coronary arteries. In Florida, diagnostic cardiac caths may be performed at facilities which do not have angioplasty and open heart surgery programs, but angioplasties must be performed, except in rare emergency circumstances, only at hospitals which are licensed to provide open heart services, in case back-up surgery is needed. Lawnwood Regional Lawnwood is located in Fort Pierce, in St. Lucie County, which is second to Palm Beach County in population and in District 9 resident open heart cases. Lawnwood is owned by a subsidiary of HCA, the Hospital Corporation of America, formerly known as Columbia. HCA is a for-profit, investor-owned corporation which owns and operates approximately 200 hospitals in the United States. A $17 million addition at Lawnwood, designed for the open heart program, includes two dedicated operating rooms and a 12-bed intensive care unit. The Lawnwood program has a full-time staff of two surgeons and one additional surgeon who divides his time between Lawnwood and PBGMC. Lawnwood, having opened its program early in 1999, is not considered a mature program. In addition, Lawnwood has had some difficulties with accreditation and disputes with cardiologists. Lawnwood reported one open heart case in the first quarter of 1999, and 143 or 144 for the year. In calendar year 2000, between 330 to 340 open heart surgeries were performed at Lawnwood. In calendar year 2001, the volume was between 333 and 336 cases. Depending on the source of the data, the volume at Lawnwood was reported to be as high as 364 for the twelve months ending September 30, 2000; in a range from 336 to 396 for the twelve months ending March 31, 2001; and up to 412 for the twelve months ending July 2001. The variances result from seasonal patient utilization, and from AHCA’s use, for the fixed need pool, of the most current available data which it receives from the various local health councils. That data is submitted on handwritten or typed forms which are not uniform across districts. Subsequently, the hospitals provide electronic data tapes directly to AHCA, which if properly decoded, should provide more accurate statistics. While there may be variances either way, in this case, the lower volumes for Lawnwood were derived from the more reliable electronic tapes. Based on that data and the testimony of the cardiac surgeon who is the director of the program at Lawnwood, the annual volume of open heart surgeries was approximately 330 in 2000, and 348 in 2001. The new rule, adopted on January 24, 2002, reduces the minimum number required for existing programs to 300 a year, or 25 adult operations a month. The number of angioplasties performed at Lawnwood increased from 465 in 1999, to 845 in 2000. Palm Beach Gardens Medical Center South of the four relatively small northern counties in District 9, PBGMC has 204 beds located in northern Palm Beach County. It is a subsidiary of Tenet Healthsystem Hospitals (Tenet). Adult open heart surgery has been available at PBGMC since 1983. The surgeries are typically performed in two or three of the 11 operating rooms, although five are equipped to handle open heart cases. PBGMC has 94 telemetry beds, and 32 intensive care beds, eight designated for cardiovascular intensive care patients. PBGMC has four cardiac cath labs and separate electrophysiology labs. The medical staff of approximately 400 physicians includes about 200 cardiologists, 24 invasive cardiologists and seven cardiac surgeons. The number of open heart cases at PBGMC was 700 in 1994, 801 in 1995, 913 in 1996, 1,028 in 1997, 1,045 in 1998, 1,124 in 1999, 940 in 2000, and 871 in 2001. The number of angioplasties increased from 552 in 1994, to 1,019 in 1997, to 1,431 in 2000. JFK JFK, which has 387 beds, is located roughly in the center of Palm Beach County, in the City of Lake Worth. Like Lawnwood, JFK is an HCA's subsidiary, having been purchased by that corporation in 1995. Open heart services and cardiac cath services began simultaneously at JFK in 1987. JFK has three open heart operating rooms. JFK, after a major expansion, has a separate entrance to its three cardiac cath laboratories, a dedicated electrophysiology suite, for treatment of arrhythmias, and 17- patient holding area. JFK provides all cardiac services, except heart transplants. The average age of patients at JFK is 74 years old. The medical staff of 504 board-certified or board- eligible physicians includes 25 cardiologists, five invasive cardiologists, two electrophysiologists, and three cardiac surgeons. JFK has recently accepted applications from but not yet extended privileges to three additional cardiovascular surgeons. Volumes of open heart cases at JFK were, with some variances depending on the data source, approximately 428 in 1994, 434 in 1995, 630 in 1996, 674 in 1997, 711 in 1998, 613 in 1999, 621 in 2000, and 610 in 2001. The number of angioplasties ranged from 709 in 1994, to 1,152 in 1997, to 1,281 in 2000. Delray Delray, with 343 beds, in Delray Beach, is the trauma center for southern Palm Beach County. Open heart care began at Delray in 1986. The surgeries are currently performed in three of ten, but soon to be a total of twelve operating rooms with shelled-in spaces set aside for two more. Patients recover in a 15-bed surgical intensive care unit. The Delray medical staff of over 600 physicians has close to 60 cardiologists, including 15 invasive cardiologists and six cardiovascular surgeons. Delray has three cath lab rooms and seven bays for holding patients pre- and post-procedure. For the years 1994 through 2001, open heart volumes at Delray were 542, 606, 609, 705, 771, 758, 759, and 738, respectively. During the same period of time, the annual number of angioplasty procedures increased from 591 in 1994, to 810 in 1997, to 929 in 2000. The existing CON-planned and approved programs in the District are well distributed geographically and allocated appropriately based on population. Considering the declining utilization, the like and existing open heart surgery programs are available and accessible. Subsection 408.035(1)(f) - services that are not reasonably and economically accessible in adjoining areas Over 30% of District 9 resident open heart cases are performed in other districts, the vast majority at North Ridge in District 10 (Broward County). The district outmigration for a service when excessive or difficult can indicate access or quality concerns and constitute a not normal circumstance for approval of a new program. In this case, with adequate available services in District 9 and its close proximity, the outmigration to North Ridge, which is 15 miles or 25 minutes from BRCH is not a not normal circumstance. There is also substantial overlap in the medical staff at both hospitals which allows continuity of care for patients despite transfers. The argument that families, particularly an older spouse, will necessarily have to drive farther to visit the patient is rejected, since that depends on where in the district the person resides not on the distances between hospitals. North Ridge has 391 licensed beds, with 260 to 270 acute care beds in use. At North Ridge, cardiovascular surgeons usually use three OHS operating rooms, although a fourth is also available. Open heart patients recover in a six-bed cardiovascular intensive care unit. The reported volumes of open hearts at North Ridge have been from 1994 through 2001, respectively, 864, 935, 893, 826, 882, 890, 905, and 795. The total number of open heart cases in District 10 has been declining since 1998. The volume of angioplasties at North Ridge increased from 793 in 1994, to 829 in 1997, to 1,155 in 2000, consistent with a rising District 10 use rate from 2.95 to 3.66 over the same period of time. The staff at North Ridge includes 107 cardiologists, 27 interventional cardiologists, and 17 cardiovascular surgeons, many of whom also regularly perform open heart surgeries at Holy Cross, which is approximately a mile south of North Ridge in Fort Lauderdale. At Holy Cross, which also has established referral networks from District 9, open heart volumes declined from a high of 753 in 1998 to 693 in 2000. All of the open heart services proposed by the applicants are reasonably available in adjoining areas, in Districts 10 and 11 to the south and in the other districts to the north. Subsection 408.035(1)(c) - comparisons of quality; and Subsection 408.035(1)(e) - joint, cooperative or shared resources; and Subsection 408.035(1)(g), (h), and (k) - need for research, educational and training programs or facilities for medical and health care professionals; and Subsection 408.035(1)(h) and Rule 59C-1.033 - recruitment, training and salaries for staff The parties stipulated that the applicants have a history of providing quality care. Martin Memorial was accredited with commendation by the JCAHO in 1997, which is now called accreditation without Type I Recommendations. That was followed, in July 2001, with a score of 93 on survey items with some follow-up improvements required related to patient assessment and nutrition. Martin Memorial offers internships, and residencies for training non-physician medical personnel from Barry University, Indian River Community College, and Florida Atlantic University. The cancer center at Martin Memorial is affiliated with the Moffitt Center. Despite the absence of an open heart program, Martin Memorial has participated in clinical trials of cardiac drugs. The Shands Healthcare System of nine affiliated hospitals, including two research and teaching hospitals, is the model for the relationship proposed with Martin Memorial. The partnerships are intended to upgrade the care available in community hospitals and to establish, for complex cases, referral networks for the Shands teaching hospitals. Shands has already satisfied itself that Martin Memorial meets its due diligence test for the quality of its existing program and philosophical compatibility. If Martin Memorial's CON is approved, Shands will assist in training staff for the program. Initially, the program will have one cardiovascular surgeon, a University of Florida medical school faculty member, in Martin County. When that surgeon is ill or on vacation, others from the University of Florida will be available. The logistics of the plan raises questions about the adequacy of coverage to meet the 24-hour requirements of Rule 59C-1.033, Florida Administrative Code. In the JCAHO survey process, Bethesda received a score of 97, as a result of its survey in June 2000, and was accredited for the maximum allowable time, three years. Personnel for a Bethesda program can be appropriately trained at Orlando Regional, a statutory teaching hospital with a high volume open heart program. In June 2000, BRCH received a JCAHO score of 96. BRCH maintains a scholarship program for new nurses making a two-year commitment, and an on-site educational department with a preceptorship for training operating room and emergency room nurses. Nursing students from Florida Atlantic University (FAU), which is located across Glades Road from BRCH, rotate at BRCH. FAU is in the process of establishing a medical school. There is a severe shortage of nurses in the United States, in Florida, and in District 9. All of the hospitals in District 9 have resorted to highly competitive and innovative recruitment and retention strategies, including international recruiting, signing bonuses, child care and, of course, rising salaries and benefits. The demand is greater and shortages more severe in highly specialized areas, such as critical care, telemetry and open heart surgery nursing. The average age of nurses has also increased to 46 or 47 years old, while enrollment in nursing schools and the number of nursing school professors have declined. All of the applicants concede that recruiting and retaining nurses for new open heart program will be a challenge. The likely results are a loss of experienced nurses from existing programs, an increase in total health care costs, an increase in vacancies, and, at least temporarily a decline in the quality of experienced nursing care in existing open heart programs. At this time, there is no evidence that declining open heart utilization will eventually alleviate the shortage of experienced nurses. It has, so far, only eased the need to resort as frequently to other extreme and expensive alternatives, including pay overtime, contracting with private agencies, and bringing in traveling nurses. Subsection 408.035(1)(m) - size, scope and fixed equipment cost at BRCH; Subsection 408.035(2)(c) - alternatives to new construction; and Subsection 408.035(1) (h) - funding for BRCH BRCH plans to construct a 74,000 square-foot cardiac care facility, which will include two open heart operating rooms and two cardiac cath labs, an electrophysiology lab, 12 cardiovascular intensive care beds, and 18 cardiac cath lab bays. Only 18,568 square feet are attributable to the open heart operating rooms and cardiovascular intensive care unit which compares favorably with Bethesda's estimate of 17,759 square feet for the same functions. It is not possible, therefore, to conclude that the size of the BRCH project is excessive as compared to that proposed by Bethesda. BRCH underestimated the cost for fixed equipment for the open heart project by approximately $1.6 million. That omission resulted in understated estimates of depreciation by approximately $275,000. The total project cost for BRCH is approximately $2.2 million when almost $2 million in omitted equipment costs is added to the original estimate of $20 million. All pending capital projects, as shown on Schedule 2 of the BRCH application, total $54 million. With combined cash and investments of $160 million, the BRCH foundation has sufficient funds for the hospital's projects. Although BRCH earned profits of $6.6 million and $7.3 million in 1998 and 1999, respectively, the hospital lost $30 million from operations due to billing and collection errors in 2000. BRCH has a donor who has stated a willingness to donate $20 million for the cardiac care center. BRCH has the funds necessary to build the facility. With Medicare capital cost reimbursement completely phased out, there is insufficient evidence of a direct impact on health care costs based on this proposed capital expenditure. Subsection 408.035(1)(i) - short and long term financial feasibility Martin Memorial initially projected that its program would perform 360 open heart surgeries in year one and 405 in year two. As a result of changes in the use rate, Martin Memorial lowered its second year projection to 375 surgeries while increasing staffing levels. Even if projected open heart surgery revenues of $264,000 in the second year decline in proportion to expected lower utilization, estimated angioplasty revenues of $468,000, are sufficient to make up the deficit and to keep the combined program financially feasible in the short and long term. Bethesda projected volumes of 165 open heart surgeries in the first year and 270 in the second year. Assuming Bethesda's revenues are 90% of the district average, the combined net profit for open heart and angioplasty services is reasonably expected to be approximately $750,000 in the second year operations. The project is profitable, therefore, financially feasible in the short and long term. BRCH's expert projected volumes of 308 open heart surgeries and 289 angioplasties in the first year, and 451 open heart surgeries and 422 angioplasties in the second year. If utilization projections are correct, then BRCH will receive incremental net income of $1.6 million from the open heart surgery program and $825,000 from the angioplasty services. Factoring in claims that the Medicare case weight was overstated and depreciation underestimated, the BRCH project is, nevertheless, financially feasible for the short and long term. Typically, any open heart surgery program that can reach volumes in the range of 200 to 250 cases, will be financially feasible. The establishment of an open heart program also has a "halo effect," for the hospital, attracting more patients to the cardiac cath labs and other related cardiology services. Open heart surgery and angioplasty tend to be profitable, generating revenue which hospitals use to offset losses from other services. Subsection 408.035(1)(j) - needs of HMOs All of the applicants will enter into contracts with, but none is a health maintenance organization. Subsection 408.035(1)(l) - probable impact of fostering competition to promote quality assurance and cost-effectiveness Hospitals with higher volumes of open heart surgeries and angioplasties usually have higher quality as measured by lower mortality rates and fewer complications. The open heart surgery rule, in effect at the time the applications were filed, established a minimum volume of 350 annual admissions for existing providers. In the rule as amended on January 24, 2002, the minimum volume for existing programs was reduced to 300. The divisor in the formula for determining need, which represents the average size of a program in the district, was 350 prior to amendment and 500 subsequently. The minimum and average volumes in the rule set, in effect, the protected range for existing programs, not the optimal size, or "cut point" at which outcomes are worse below and better above. According to the American College of Cardiology and American Heart Association (ACC/AHA) the evidence is clear that outcomes are better if an individual performs at least 75 procedures at a high volume center with more than 400 cases. The ACC/AHA guidelines indicate, although more controversial and less clearly established, that acceptable outcomes may be achieved if the individual operator performs at least 75 procedures in centers with volumes from 200 to 400 cases. Because the relationship between higher volumes and better outcomes is continuous and linear, and because research showing the benefits of primary angioplasty with or without open heart surgery back-up is preliminary and limited, the position of the ACC/AHA is, in summary, as follows: The proliferation of small angioplasty or small surgical programs to support such angioplasty programs is strongly discouraged. (Journal of the American College of Cardiology, Vol. 37, no. 8 June 15, 2001, pp. 2239xvii (Tenet Exhibit 5)) An open heart program at Martin Memorial will redirect cases that would otherwise have gone to Lawnwood, PBGMC, and JFK. The proposed Martin Memorial Service area overlaps that of Lawnwood in southern St. Lucie County, an area which generates one quarter of the open heart cases at Lawnwood. Lawnwood is reasonably expected to lose 56 open heart cases a year with total volume going down below 300, resulting in loss of $1.8 million, or 20% of its total revenues. Lawnwood would have unacceptably low volumes threatening the quality of the open heart program. PBGMC, as a result of a new program at Martin Memorial, will lose approximately 170 and 180 open heart cases annually and an equal number of angioplasties reducing its open heart volume to approximately 700 a year. The financial loss would range from $4 to $5 million a year, as compared to total net income which was between $20 and $30 million a year for past three years. PBGMC would not suffer an adverse impact sufficient to threaten either the quality or the financial feasibility of the open heart program or total hospital operations. JFK, which currently receives most of the angioplasty referrals from Martin Memorial, is expected to lose from 25 to 30 open heart cases, and 65 to 70 angioplasties each year during the first two years of a Martin Memorial program. The estimated financial loss to JFK is $1.7 million, a significant detriment when compared to $2.8 million in net income from operations in calendar year 2000. Approval of open heart program at Bethesda will adversely affect case volumes at JFK and Delray. Bethesda projected that, in its first year, 75% of its cases would have gone to Delray and 25% to JFK, and that by the third year, the split would be even at 50% from Delray and 50% from JFK. JFK, depending on the approach to the impact analysis, will lose from 40 to 60 open heart cases in the first year, from 90 to 110 in the second year, and from 115 to 170 in the third year of a program at Bethesda. The volumes of lost angioplasties is expected to be slightly higher. The resulting combined open heart and angioplasty financial loss is $6.6 million, far greater than the significant detriment expected from a Martin Memorial program alone. The annual volume of open heart cases at JFK would be approximately 400 to 500, assuming flat not continued declining utilization. If Bethesda offered the service, Delray's open heart volumes would decline by 124 cases in the first year and by 248 cases in the third year of operations, decreasing total volume to 500 or 600 annual surgeries. Delray had a net income from operations of approximately $24.7 million in 2000, which would indicate that neither quality nor financial stability would be significantly adversely affected. If an open heart program is approved for BRCH, the volumes of cases at Delray and North Ridge will decline. Delray would be expected to lose 163 open heart cases and 235 in years one and two, respectively, and equal numbers of caths and angioplasties, resulting in annual open heart cases reduced from the low 700s to approximately 500 cases. Delray's pre-tax revenue was $39 million in 2001. In terms of quality and financial stability, Delray can withstand the adverse impact of a new program at BRCH. North Ridge would lose approximately 124 open heart cases in year one and 178 in year two, and similar numbers of caths, reducing open heart volumes from the upper 700s to approximately 600 annual cases. North Ridge's pre-tax income was $21 million for the year ending May 31, 2001. It appears that North Ridge could, even with the adverse impact of BRCH, maintain a quality, financially viable open heart program. Subsection 408.035(l) - probable impact on costs The applicants, all not-for-profit corporations, contend that the fact that District 9 has only for-profit open heart hospitals affects charges and is a not normal circumstance for the approval of one or more not-for-profit. District 9 is the only district in Florida in which all open heart providers are for-profit corporations. Statewide, not-for-profit open heart hospitals charge 31% less than for-profit. Martin Memorial's CON proposal includes a charge structure below that at existing programs. Bethesda's planned charges are 10% less than the District 9 average for open heart and angioplasty services. BRCH is the applicant which is most likely to increase competition in District 9, based on the Herfindahl-Hirschman Index (HHI). The HHI's measurement of competition in a market used by economists frequently to analyze anti-trust issues. Charges are not a factor in up to 75% of open heart/angioplasty cases reimbursed by payors, such as Medicare, at set flat rates. In approximately 10% of cases, including complex "outlier" cases exceeding the range for flat rate reimbursement and for other payors on a percent-of-charges basis, charges are not irrelevant. But, the evidence to demonstrate lower charges were applicable to patients of the same severity was questionable. Subsection 408.035(1)(o) - continuum of care There is insufficient evidence the any applicant is preferable based on its ability to promote a continuum of care in a multilevel system. Subsection 408.035(2)(a) - alternatives to inpatient services There are no alternatives to inpatient services for open heart surgery and angioplasty patients. Subsection 408.035(2)(d) - patients who will experience serious problems in the absence of the proposed new service The applicants and AHCA determined that new open heart surgery programs are needed mainly to provide emergency or "primary" angioplasty to patients suffering heart attacks (acute myocardial infections). Primary angioplasty is an alternative to "clot busting" medications, or thrombolytics, and to open heart surgery. Performed on an emergency basis, the three different treatments are used to restore blood flow before heart muscle dies. Because "time is muscle," patients benefit only if treated within a relatively short time after the onset of symptoms. The goal is 90 minutes from door-to-balloon for angioplasty. The decision to treat a patient with a particular therapy is based on a number of factors assessed during triage. Paramedics in consultation with ER doctors at the receiving hospital frequently begin triage and administering medications and oxygen in ambulances equipped with sophisticated diagnostic equipment. As the statistical data demonstrates, angioplasty, whether scheduled or emergency, is increasingly becoming the preferred therapy. Some studies have shown improved outcomes, higher survival rates and fewer complications, from primary angioplasty as compared to thrombolytics. Comparisons have not been made over extended periods of time, and the apparent benefits of angioplasty have not been duplicated in community hospitals as compared to clinical trials in high volume research centers. Estimates of the number of people who could benefit from the availability of angioplasty services at the applicants vary based on the number of elderly in the service area, the number of non-traumatic chest pain ER visits, delays in transfers of emergency patients, and the number of patients being transferred to existing providers for angioplasties or open heart surgeries. Martin Memorial selected five patients as examples of those who could be served in an open heart program at Martin Memorial. The anecdotal evidence of transfer "delays" is insufficient to demonstrate bed unavailability or capacity constraints. Martin Memorial-Stuart and Martin Memorial South transferred 240 heart attack patients to open heart surgery hospitals. Only 18 of the emergency heart attack patients who presented at the Martin Memorial ER were transferred from the ER. Approximately ten patients a year are so unstable that an intra- aortic balloon pump is required during transfer. Martin Memorial presented evidence of delays of two hours or more in transfers of 84 patients from its cath labs to open heart surgery hospitals. The transfer records, created for subsequent certificate of need litigation, were of questionable probative value. The case studies were inadequate to establish whether "delays" were reasonable or not. Factors such as physician consultation time, time to stabilize a patient for transfer and the assumed travel time seem to have been included in the time periods. Bethesda transferred 270 patients for cardiac care from October 1999 through September 2000. Thirty patients were transferred, from November 2000 to July 2001, for angioplasties or open heart surgery after having cardiac caths at Bethesda. Bethesda failed to establish that transfers were delayed due to capacity problems at existing hospitals because emergency patients were not classified separately, and the causes of the time lapses were not identified. Of the applicants, BRCH has the busiest ER, with 50,000 to 52,000 annual visits compared to approximately 48,000 at the two Martin Memorial locations combined. BRCH admitted 439 heart attack patients through its ER during the year ending June 30, 2000. The majority of patients are treated with thrombolytics at BRCH. BRCH transfers approximately one emergency heart attack patient a week on average, or from 30 to 50 a year, for interventional cardiac procedures. BRCH's presentation of evidence of delays in transfers was flawed. The data was collected and used only for litigation, and was incomplete. Some patient records were lost and others were deleted due to inaccurate data. Of the applicants, BRCH is located in an area with the largest percentage of the population age 65 and older, approximately 35%, as compared to 24% in Martin Memorial's service area. Agency Consistency Martin Memorial, through expert witness testimony, compared its situation to that of Brandon, a hospital in AHCA District 6, which was issued an open heart surgery CON in 2001. The expert noted that Martin Memorial and Brandon are both in five county health planning districts, and that they are 19 and from 15 to 17 miles, respectively, from the nearest open heart provider. Three of the counties in District 6 have open heart programs, including Hillsborough County where Brandon is located, as compared to two District 9 counties, St. Lucie and Palm Beach, but not Martin. The Martin Memorial primary service area projected population is 238,861 for 2004, 24.1% aged 65 and older. The Brandon service area population projection is 309,000 for 2004, with 10.5% aged 65 and older. Brandon has 255 beds, Martin Memorial-Stuart has 236. Brandon had 53,000 emergency room visits, and Martin Memorial, at both locations, had 48,503 in 1999. Before defaulting to zero, the numerical formula yielded a need for 3.27 additional open heart programs in District 6 as compared to 3.9 in District 9. Other specific comparisons favorable to Martin Memorial included the number of heart attack patients presenting at its ER, cath lab volumes, patient transfers for open heart and angioplasty procedures. Among others, there are several significant distinguishing facts in Florida Health Sciences Center, Inc. v. Agency for Health Care Administration, Case No. 00-0481CON, (R.O. Mar. 30, 3001, F.O. Oct. 17, 2001) aff'd per curiam sub nom, University Community Hospital v. Agency for Health Care Administration, Case No. 1DO1-3592, et al. (Fla. 1st DCA Sept. 19, 2002), the Brandon case. In that case, the two existing providers performing fewer than 350 cases a year, Blake Medical Center, and Manatee Memorial Hospital, both in Manatee County, were mature programs located 40 miles from Brandon with no service area overlap. By contrast, Lawnwood which is not a mature program and, therefore, has not reached its potential volume, is 20 miles from Martin Memorial, and has an overlapping service area. Martin Memorial's ER volume and the number of transfers from its ERs are the combined experience from two locations. The more accurate comparison is 27,000 ER visits at Martin Memorial-Stuart to 53,000 at Brandon. Emergency heart attack patients presenting at Martin Memorial South would continue to require transfers for primary angioplasty. Finally, the decision in Brandon was based, in large part, on transportation difficulties, inadequate interfacility ambulances and traffic congestion, which are not factors in District 9. Factually, the case of Halifax Hospital Medical Center, d/b/a Halifax Medical Center v. Agency for Health Care Administration, et al., Case No. 95-0742 (AHCA Jan. 14, 1997) is also distinguishable. The applicant could have no effect on the low volume providers located 80 miles to the north. That was one not normal circumstance. Need existed because of another not normal circumstance, i.e., capacity constraints at the only other provider in the same primary service area. In Oak Hill Hospital v. AHCA, Case No. 00-3216CON (R.O. Oct. 4, 2001, F.O. Jan. 22, 2002), appeal dismissed sub nom Hernando HMA, Inc. v. HCA Services of Florida, Inc., Case No. 1DO2-854 (Fla. 1st DCA June 6, 2002), the two approved applicants were in separate counties which constituted entirely separate health care markets. Neither applicant would adversely affect the low volume providers. After the Administrative Law Judge recommended approval of the Citrus County applicant, AHCA, engaging in what appears to be a comparative review of the two remaining applicants from Hernando County, approved a second applicant from the same district at the same time. Some facts are similar to those in this case: The average drive time between hospitals was 30 minutes; transfers and admissions procedures required additional time; there was a recognition of increasing preferences for reperfusion of heart muscle using primary angioplasty; patients and families experience stress and anxiety as a result of transfers. Institution-specific issues included the transfer of 600 cardiac patients by ambulance from Oak Hill, the size of the cardiology and cardiac cath programs (1,641 caths in 1999), the larger elderly population in the service area, and the hospital's size.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order denying Certificate of Need Application Number 9248 filed by BRCH, Certificate of Need Application Number 9249 filed by Martin Memorial, and Certificate of Need Application Number 9250 filed by Bethesda. DONE AND ENTERED this 11th day of November, 2002, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of November, 2002. COPIES FURNISHED: Lealand McCharen, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Valda Clark Christian, General Counsel Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Gerald L. Pickett, Esquire Agency for Health Care Administration 525 Mirror Lake Drive, North Sebring Building, Suite 310K St. Petersburg, Florida 33701 Lori C. Desnick, Esquire Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Stephen A. Ecenia, Esquire David Prescott, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 W. David Watkins, Esquire R. L. Caleen, Jr., Esquire Watkins & Caleen, P.A. 1725 Mahan Drive, Suite 201 Post Office Box 15828 Tallahassee, Florida 32317-5828 H. Darrell White, Esquire William B. Wiley, Esquire McFarlain & Cassedy, P.A. 305 South Gadsden Street Post Office Box 2174 Tallahassee, Florida 32316-2174 Paul H. Amundsen, Esquire Amundsen, Moore & Torpy, P.A. 502 East Park Avenue Post Office Box 1759 Tallahassee, Florida 32302 Robert D. Newell, Jr., Esquire Law Firm of Newell & Terry, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 C. Gary Williams, Esquire Michael J. Glazer, Esquire Ausley & McMullen 227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 Seann M. Frazier, Esquire Michael J. Cherniga, Esquire Greenberg Traurig, P.A. 101 East College Avenue Tallahassee, Florida 32302
The Issue The issue is whether the application made by Plantation General Hospital for certificate of need number 5736 for an open heart surgery program should be granted.
Findings Of Fact General. Procedural background and description of the parties. Plantation General Hospital filed a letter of intent with the Department of Health and Rehabilitative Services (Department) and the local planning agency noticing its intention to file an application for a certificate of need for an adult open heart surgery program on August 28, 1988. Its application for certificate of need No. 5736 was filed on September 28, 1988. On October 10, 1988, the Department notified Plantation of omissions from its application, which were supplemented in a response filed November 14, 1988, and the Department deemed the application complete on November 16, 1988. The Department issued its notice of intent to deny the application on January 30, 1989, and Plantation requested a hearing on that denial. Florida Medical Center, North Ridge General Hospital and Broward General Hospital intervened in the proceeding. Broward General sought to intervene shortly before the hearing was to begin, and its participation was limited. By notice dated May 31, 1989, the Department announced that it had reconsidered its position and would support Plantation's application. Plantation General Hospital is a 264-bed general medical surgical hospital located in the City of Plantation, Broward County, Florida. It is owned by Hospital Development and Services Corporation which in turn is owned by Healthtrust, Inc. It offers acute care services, except for open heart surgery and burn treatment. It does not propose to perform pediatric open heart surgery. It does offer cardiac catheterization and other non-invasive cardiac services such as EKG, stress testing and other procedures. It also has services which would support an open heart surgery program such as radiology, pathology, anesthesiology, neurology, intensive care, and an emergency room. Plantation received a certificate of need in 1984 to operate a cardiac catheterization laboratory, which opened in April of 1985. It now performs a large number of catheterizations, so that there is pressure to offer an open heart surgery program. Diagnostic catheterizations often reveal that a patient could benefit from open heart surgery. Patients prefer to have surgery done at the hospital where the catheterization is done. Conversely, patients often choose a hospital for catheterization that has the capability to perform open heart surgery. Patients having therapeutic catheterization (angioplasty) must be served at a hospital approved to offer open heart surgery. Therapeutic catheterization itself sometimes triggers the need for immediate heart surgery. Plantation is currently constructing a new wing for its obstetrical patients and proposes to convert part of its present obstetric space for use by the open heart surgery program. The proposed open heart area would have a single operating room, a recovery area, a pump room for the heart-lung oxygenator pump, a sub-sterile storage area and a nurses' station. Existing beds near the proposed open heart area are monitored beds which could be converted to cardiovascular intensive care unit beds at a lower cost than would be the case for wholly new construction. That conversion would not require certificate of need review. The project Plantation General proposes involves the renovation of 2,229 square feet at a projected cost of $267,480. Equipment is projected to cost an additional $300,000. Plantation General anticipates the total project cost will be $599,970. Plantation is not a teaching or research hospital and does not propose to offer teaching or research as part of its open heart surgery program. The hospital does not contend that there is an unmet need for indigent open heart health services which its project would fill. It has historically provided some medical service to Medicaid patients and to the medically indigent. Plantation does not contend, however, that the level of its medical services historically provided to the medically indigent, the extent to which it proposes to provide open heart surgery to underserved population groups, or to Medicaid patients enhances its application. These items are neutral factors which have no impact on the need determination. The Intervenors acknowledged that Plantation would provide minimally appropriate open heart services for the indigent. Plantation General's owner, Healthtrust, Inc., has created a limited partnership to become the new owner of its hospital; Hospital Development and Services Corporation will serve as the general partner, and a number of doctors will be limited partners. The partnership offering is closed, and the approvals, transfers, and other activities created by the closing of the partnership are ongoing. It is anticipated that after receipt of all approvals and transfers the partnership will be deemed to have been in effect as of June 1, 1989. Florida Medical Center is a 459 bed acute hospital located in Fort Lauderdale, Broward County, Florida. It provides a full array of cardiac services, with the exception of heart transplants. It offers cardiac catheterization services, and was the first hospital to offer open heart surgery in Broward County. North Ridge Medical Center presented no testimony about its size or location because its standing had been stipulated. It provides a full array of cardiac services including cardiac catheterization and open heart surgery, but not heart transplants. North Ridge performs the largest volume of open heart surgery procedures in Broward County. Broward General Hospital is the largest facility of the four facilities operated by the North Broward Hospital District, an independent special taxing district. Broward General has 744 acute care beds, and is located in Fort Lauderdale, Florida. It operates an array of cardiac services, including cardiac catheterization, coronary angioplasty, cardiac electrophysiology studies, intra-aortic balloon pumping, and insertion of temporary and permanent pacemakers. Its physical plant consist of one open heart surgery suite, one cardiac catheterization laboratory, and cardiac and progressive care beds. On January 26, 1989, North Broward Hospital District entered into a contract with the Cleveland Clinic Florida which will permit the clinic to provide its cardiac services exclusively at Broward General. Broward General is in the process of expanding its open heart surgery suites from one suite to two, its catheterization labs from one to two, and adding 16 coronary care and 24 progressive care beds. Broward General has 29 staff cardiologists, three of whom are Cleveland Clinic Florida physicians who hold interim privileges. Eight cardiovascular surgeons are on its staff, two of whom are Cleveland Clinic Florida physicians. Statutory Criteria for Evaluating Certificate of Need Applications. Consistency with the state health plan and local health plan. Section 381.705(1)(a), Florida Statutes. The Department is required to consider The need for the health care services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health. Section 381.705(1)(a), Florida Statutes. Plantation General does not contend that there are emergency circumstances in Broward County which threaten the public health and require approval of its application. Prehearing stipulation, paragraph 12. There is no applicable state health plan because the last plan was specifically drafted to cover the period 1985-87. That last plan does contain a goal stating that it is the state's desire to "ensure the appropriate availability of . . . open heart surgery services at a reasonable cost" and the goal is implemented by an objective, number 4.2, which is "to maintain an average of 350 open heart procedures per program in each district through 1990." This objective is predicated upon the assumption that the Department will interpret subparagraph 11 of Rule 10-5.011(1)(f), Florida Administrative Code, infra, to permit a new program if the existing programs, on the average, provide 350 open heart procedures per year. The correctness of that interpretation is discussed in Findings 60 and 61, as well as in the Conclusions of Law. The state health plan also states that applicants proposing cardiac surgery must make those services available to all segments of the population regardless of their ability to pay. Section 381.705(1)(n). The parties stipulated that Plantation has provided medical services to Medicaid patients and to the medically indigent and the extent to which Plantation proposes to provide open heart services is neither an enhancement nor detraction from its application. Currently five facilities in Broward County provide open heart surgery: Broward General, Florida Medical Center, North Ridge, Holy Cross, and Memorial Hospital. There are no facilities which have not yet opened, but which have obtained certificate of need approval for open heart surgery. During the period of July 1987 - June 1988, current providers had the following volume of procedures: Hospital Broward General Number of Procedures 143 Florida Medical Center 382 North Ridge 781 Holy Cross 362 Memorial 478 Total Dividing the number of procedures 2,146 by the five existing providers yeilds an average of 431 procedures per program. The average number of procedures therefore exceeds 350, which is consistent with the provisions of the old state health plan. The local health plan has three criteria which bear upon the application. It requires that the application be consistent with accreditation standards, the hospital must be willing to accept patients from all payor classes, and must comply with the Department's rules. It is stipulated that Plantation General has full accreditation and if approved will obtain accreditation for its open heart surgery program. Plantation accepts Medicare, Medicaid, private pay, and indigent patients. At page 70, its application states that the hospital will provide 2% of its open heart surgery to indigent patients, 67% of its patients will be Medicare patients and 31% will be private pay patients. The hospital has not projected any Medicaid utilization because open heart surgery is typically performed on older patients, and most of those patients will qualify for Medicare rather than Medicaid due to their age. No Medicaid open heart surgery was reported in HRS District X (Broward County) for the year preceding Plantation's application. The application is consistent with the last state health plan and the local health plan. Availability, utilization, geographic accessibility and economic accessibility of facilities in the district. Section 381.705(1)(b), Florida Statutes. Open heart surgery is available to all residents in Broward County within two hours normal driving time; it is therefore geographically accessible. Plantation does not propose to provide a substantial portion of its open heart services to individuals who reside outside of HRS Service District X (Broward County). Plantation does not contend that there is a pool of patients who are denied access to open heart surgery on financial grounds. The increased access to indigents which Plantation would provide is negligible (only about six surgeries per year), and the parties have stipulated that its commitment to provide services to the medically indigent neither enhanced nor detracted from its application. There is no evidence of any waiting list at facilities which provide open heart surgery which would be alleviated by the approval of Plantation General's application. Plantation's argument that service availability has been a problem for some patients at Plantation who need open heart or emergency angioplasty services is rejected. It can provide diagnostic catheterizations but not angioplasty because it lacks open heart surgery certification. With respect to emergency angioplasty, there is an inherent service availability problem when a hospital such as Plantation establishes a catheterization lab, when it is not approved to provide open heart surgery. Angioplasty can have the unfortunate side effect in a small number of cases of triggering an immediate need from open heart surgery. A patient must be immediately transferred, or the open heart surgery must be performed at Plantation, even though it is not approved for that service. Those problems are problems which Plantation knowingly assumed when it began its catheterization lab knowing that it was not approved for open heart surgery. It is not significant that at times of peak demand at Florida Medical Center there may be no beds available for a patient from Plantation who needs open heart surgery. Patients are commonly transferred to Florida Medical Center because it is the nearest hospital to Plantation. More than one half of its patients who were transferred went to Memorial Hospital, however, not Florida Medical Center. There is no evidence that another hospital in Broward County has not had a bed available for a patient from Plantation who needed open heart surgery when Florida Medical Center's unit was full. The issues of efficiency and the extent of utilization raise the question whether there is additional capacity in existing open heart programs which should be used in preference to opening a new program at Plantation General. This is related to the need calculation made in Rule 10-5.011(1)(f)8, Florida Administrative Code, discussed at Finding 60. An efficiency standard of 350 procedures per year is found in Rule 10-5.011(1)(f)11a(I), Florida Administrative Code. That utilization standard is met by all facilities in Broward County except for Broward General, see, Finding 14, supra. It provided only 143 open heart procedures in the year July 1987-June 1988. Broward General has been providing open heart surgery for 16 years and has not yet approached the 350 procedures per year. Broward General is in the process of substantially expanding its cardiac program, through its association with the Cleveland Clinic, and the addition of a second open heart surgery operating room. That expansion could accommodate the volumes Plantation seeks to achieve. Florida Medical Center already has two open heart surgery rooms in operation and is adding a third. Based upon its current volumes and the fact that there is no reasonable likelihood of real future growth in the use rate for open heart surgery, Broward General and Florida Medical Center have existing capacity to serve the demand for surgeries which Plantation projects it would perform during its first two years of operation. North Ridge provides approximately 600 surgeries per year, and utilizes more than one operating room. It also has capacity to contribute to District X (Broward County), especially given the reduced demand in Broward caused by the reduction in Palm Beach County residents coming to Broward County for open heart surgery. Open heart surgery programs in Palm Beach County hospitals have recently come on line, and are providing surgery for Palm Beach County residents who formerly traveled to Broward. There is no evidence that existing open heart surgery programs lack the capacity to sufficiently handle future demand. There is no proof that existing facilities are being over utilized, which is consistent with the prior finding that there is no waiting list at any provider. All candidates for open heart surgery are currently being served. There is little overlap in the medical staffs of Plantation General and Broward General, and Plantation referred no cases to Broward General for open heart surgery in 1987 and only three in 1988, but the additional capacity of Broward General is an important consideration. Part of the reason for the certificate of need process is to control and reduce capital expenditures, and, through that control to indirectly reduce associated labor costs and other ancillary costs which arise from the proliferation of medical services. To the extent that other institutions, especially Broward General, could provide additional surgery through its approved open heart surgery program, restraining an increase in the number of providers will eventually have the effect of directing patients to hospitals with lower utilization. This might not be the case if there were proof that Broward General did not provide quality care, and residents voted with their feet and shunned the program to seek care elsewhere. The parties have stipulated, however, that there are no quality of care problems with any of the existing open heart surgery programs in the county, including Broward General. Efficiency considerations therefore weigh against approval of the Plantation General application. There are no geographic accessibility problems, nor any reason to believe that access to open heart surgery by medically indigent or other underserved populations would be enhanced by the Plantation General proposal. Ability of applicant to provide quality care. Section 381.705(1)(c), Florida Statutes. Plantation General is fully accredited by the Joint Commission on the Accreditation of Hospitals. It provides quality care in the services now available at Plantation General. Plantation intends to implement its open heart surgery program by forming a steering committee to direct its development, with responsibility to assure that the program will comply with all applicable rules and provide high quality services. In an effort to keep the cost of its program low, the Plantation General application has sought to minimize the renovations, expansions, and the equipment attributable to the program. This attempt at cost effectiveness has serious quality of care implications. It will be difficult to provide a quality open heart program operating at a reasonable surgical volume with a single operating room; the application also proposes only to have one oxygenator pump, which is inadequate. Plantation General is likely to encounter difficulty in finding a sufficient number of skilled personnel to provide a quality program. It assessing the adequacy of a single open heart surgery operating room, it is necessary to keep in mind that Plantation will also be providing therapeutic catheterization, or angioplasty, which requires immediate access to open heart surgery as a back up. The volume of angioplasties will affect the hospital's ability to schedule open heart surgery in its single operating room, for angioplasty cannot take place if there is no operating room available for open heart surgery should the patient require it. Plantation projects it will handle between 203 and 271 angioplasties in the first year its open heart surgery program will operate, and between 218 and 291 angioplasties in the second year. The average time for an angioplasty is 3 to 3.5 hours. The open heart surgery team and other staff also must be available on site while angioplasty proceeds in case they are needed. In terms of the staff necessary to perform open heart surgery, the Plantation application indicates that there will be one surgical team. Each team consists of two surgeons, one anesthesiologist, a circulating nurse, a perfusionist to operate the heart-lung oxygenator pump, and two scrub nurses. Plantation did not adequately explain how its staffing projections would enable the open heart surgery service to cover the projected number of surgeries and angioplasties, given the substantial overtime that would have to be incurred if both the open heart and angioplasty programs operate. In order to provide angioplasty coverage, by 1991-92, Plantation's open heart surgery schedule will have to provide 654 to 873 hours of angioplasty back-up coverage, based on a three hour average angioplasty. In turn, this means that 12.5 to 17 hours of such coverage will be necessary each week based upon an average time of 3 hours for each angioplasty. The cardiac surgeons on staff at Plantation will require about 5 1/2 hours to perform open heart surgery without including clean up or set up time. For Plantation's open heart surgery program during its second year of operation, its health care planner, Mr. Nelson, assumes six operations per week during the first three-quarters of the year and eight per week in the last quarter of the year. The normal operating hours for the program will be 8 to 9 hours per day. Thus, for the first three quarters of 1991-92, open heart surgery will occupy the time available in the single operating room at least three days a week. The 4 to 5 angioplasties still must be covered, which will require at least 2 days of the dedicated open heart surgery room's time. By the last quarter of the second year of operation, the open heart surgery suite will be utilized at least 4 days a week for actual surgery, leaving only one day available for the necessary angioplasty back up coverage. Thus, the single operating room proposed will require the hospital surgical staff to regularly work well beyond normal operating hours and will create substantial scheduling problems to accommodate both open heart surgery and angioplasties. What this means is that it is not likely that the configuration for the open heart surgery program proposed by Plantation will work out. Plantation will have to add staff, and probably renovate and equip another operating room. The Intersociety Commission on Heart Disease Resources guidelines recommend that an open heart program have two fully equipped open heart operating rooms, or a designated open heart operating room immediately adjacent to a general surgical suite which also has the necessary equipment in place to provide open heart surgery. Plantation's proposal would violate these guidelines because it has only a single operating room and only enough equipment in to handle one operating room. Plantation's witness, Mr. Webb, did testify that he has worked in two other facilities with only one open heart operating room, that the rooms were not dedicated solely to open heart, and no serious problems were encountered with these programs, but his testimony did not deal with the problems likely to be encountered by Plantation given its projected open heart volumes and likely angioplasty volumes. It may be true that after the open heart surgery program is implemented, additional operating rooms might be added without requiring additional certificate of need review, but it is improper for the institution to low-ball its application projections, on the assumption that it can later make &*an inadequate proposal sufficient by additional capital expenditures for construction or reconfiguration of operating rooms, acquisition of additional equipment or hiring additional staff. Such a piecemeal process defeats the purpose of certificate of need review; it causes a review of selected portions of a program, rather than the program as it will actually operate. Plantation's intention to purchase a single heart-lung oxygenator pump is a serious deficiency. A single pump is likely to suffer occasional mechanical breakdown, and no other pump will be available in an emergency. More importantly, the pump will certainly need routine maintenance, and the heavy schedule of use for the operating suite based upon the projected volumes of open heart and angioplasty cannot be maintained with a single pump. The pump should not be moved from room to room because of the increased risks of contamination caused by movement. With respect to the configuration of the overall unit, the operating suite will have four cardiovascular intensive care unit beds in its open heart surgery area. This is an adequate design, even though most of the cardiovascular intensive care beds will be on the third floor. Plantation General's ability to provide quality care is also questionable based upon the limited partnership it has formed with its doctors. Since the advent of diagnostic related groups (DRGs), the reimbursement to hospitals from federal sources has been limited to a flat fee arrangement. It is in the interest of the hospital to discharge patients as quickly as possible, to maximize the value of that payment. On the other hand, doctors refer, admit and discharge patients from the hospital, hospital administrators do not. Hospitals therefore seek ways to encourage doctors to share the hospital's financial incentives to make a profit within the payment constraints of diagnostic related groups. One way to do this is to have doctors share in the profitability of the hospital. Plantation General has formed a limited partnership with some of its doctors. Those limited partners must be on the active staff of Plantation. The general partner is Hospital Development and Services Corporation, the owner of Plantation General Hospital. The partnership will lease the hospital, and the limited partners will be paid, based on their units of ownership, upon the operating cash flow of the hospitals. If doctors refer more patients to the hospital, the cash flow will be greater and distributions should be larger. This arrangement is fraught with the potential for abuse which is highlighted in the prospectus for the limited partnership, which states: Prospective Payment System. The Social amendments of 1983 established a prospective payment system for Medicare and amended Section 1866(a)(1)(F) of the Social Security Act (the "Act") to specify that hospitals seeking reimbursement under the prospective payment system must enter into agreements with a utilization and quality control peer review organization ("PRO"). Section 1886(f)(2) of the Act specifies that the Secretary of the Department of Health and Human Services may deny payment or require a hospital to take corrective action if a PRO provides the Secretary of the Department of Health and Human Services with documentation that a hospital has attempted to circumvent the prospective payment system through unnecessary admissions or overutilization. Fraud and Abuse. The Act imposes criminal penalties upon persons who make or receive kickbacks, rebates in connection with the Medicare prog anti-fraud and abuse rules prohibit prov others from soliciting, offering, receiving o directly or indirectly, any remuneration in r either making a referral for a Medicare-covere or item or ordering any covered service Violations of these rules may be punished by up to $25,000 or imprisonment for up to five both. In addition, the Medicare a and Program Protection Act of 1987 makes it a civil offense to violate these prohibitions, punishable by exclusion from the Medicare and Medicaid programs. The Limited Partners are to receive cash distributions based upon the available cash flow, if any, of the Partnership generated through the provision of services to patients admitted to the Hospital by physicians, some of whom will be Limited Partners. The Limited Partners therefore may receive a greater amount of distributions if physicians admit a greater number of patients to the Hospital. Individual investors share in the Partnership's cash flow only in proportion to their respective investments in the Partnership and not in accordance with the number of referrals or admissions each makes. Arguably, therefore, the investors' sharing of Partnership profits would not be a prohibited kickback or rebate. The Third Circuit United States Court of Appeals has recently held that the fraud and abuse rules are violated if one purpose (as opposed to a primary or sole purpose) of a payment to a provider is to induce referrals. U.S. versus Greber, 760 F. 2d 68 (1985). The Greber case involved the payment of fees for alleged professional services. Although the Greber holding (i.e., the one purpose test) casts an extremely wide net, its application to the present facts is not clear. Although as stated above, the present arrangement, which involves the allocation of cash flow on the basis of ownership interests held, arguably is not objectionable on these grounds, it is clear that as the number of referrals and admissions increase, revenues and, potentially, available cash flow will increase. It is not inconceivable, therefore, that the Partnership's activities may be held to violate the anti-fraud and abuse rules and subject the Partnership and the Partners to criminal and civil sanctions. The federal government has announced a policy of scrutinizing and evaluating joint ventures among healthcare providers under the fraud and abuse rules, and this area of the law is in a state of rapid development and change. Because of the changing state of the law and the lack of clear authority, it is not possible to give a more precise analysis of the application of the fraud and abuse provisions to the Partnership. The hospital's limited partnership arrangement is also probably contrary to the Code of Ethics of the American College of Physicians. It states: The physician should avoid any business arrangement that might, because of personal gain, influence his decision in patient care. . . In the case of personal conflicts, the moral edict is clear, the physician must avoid any personal commercial conflicts of interest that might compromise his loyalty in treatment of patients. Collusion with nursing homes, pharmacists, or colleagues for personal financial gain is morally reprehensible. For a physician to own shares in a drug company or in a hospital in which he practices does not constitute an unethical behavior of itself, but it does make him vulnerable to the accusation that his actions are influenced by such ownership. The safest course would be to avoid any such potentially compromising situation. Unfortunately, the application here has the direct effect of promoting compromising situations of this type. Moreover, this type of arrangement has been the subject of a "special fraud alert" from the Office of the Inspector General of the U. S. Department of Health and Human Services. One of the factors that the Inspector General looks to is "whether investors are chosen because they are in a position to make referrals." Under the prospectus for the Plantation General limited partnership, only medical staff can become limited partners and "physicians expected to make a large number of referrals may be offered greater investment opportunity in the joint venture than those anticipated to make fewer referrals." (Tr. 520) Moreover, "investors may be required to divest their ownership interest if they cease to practice in the service area, for example, if they move, become disabled, or retire." (Id) While it is understandable that the owner of the hospital may find the limited partnership to be an attractive means to bond physicians to its profit motivation, this set-up creates inherent conflicts of interest which have serious implications for quality of care. This innovation should not be condoned through certificate of need approval. Availability of health manpower and the extent to which the proposed services will be accessible to all residents of the District. Section 381.705(1)(h), Florida Statutes. An applicant must demonstrate that there is adequate health manpower to meet the staffing needs of the project. There is a current nursing shortage nationally, and recent graduates from nursing school do not posses the training necessary to perform in an open heart operating room or critical care after surgery. One of the means Plantation proposes to fill its nursing positions is to use agency nurses, nurses provided by pool services from temporary placement agencies. (Tr. 70, Plantation's proposed finding 31). While such nurses may be valuable in other parts of the hospital, these sort of temporary nurses should not be used in an open heart program. Hospitals in general and open heart surgery programs in particular suffer an acute shortage of qualified nursing staff. Florida Medical Center has found it necessary to establish its own training program because it cannot find adequately trained nurses in Southeast Florida, including Dade, Broward, and Palm Beach Counties. Even North Ridge Hospital, which has a reputation for high staff retention, has a nursing turn-over rate of 20 to 25%. When Delray Hospital in Palm Beach County opened its open heart surgery program its program was under substantial pressure because of its high nursing turn-over rate, its inability to find nurses to cover a 24 hour period of time and nurse "burn out" from excessive overtime. The Broward County nursing shortage contributes substantially to increased health care costs because of the marketing and monetary incentives related to recruiting and retaining nurses. New open heart programs must raid nurses from competing programs, which exerts a upward pressure on nurse salaries. If the Plantation program were to be approved, the existing open heart programs would probably lose nurses, which has an adverse impact on the present system. None of the foregoing should be construed as a reason to deny nurses the economic advantages which arise from a nursing shortage. The issue is whether, taken as a whole, the benefits of the application justifies the upward pressure on health care costs implicit in the approval of an additional program when there is additional capacity in current providers. On balance here, there is inadequate reason to do so. Immediate and long term financial feasibility. Section 381.705(1)(i), Florida Statutes. Many of the elements of financial feasibility are not in dispute. The parties have stipulated that Healthtrust, the parent corporation for Plantation General, has access to $600,000 and will make those funds available if this application is approved. They also stipulated that if one operating room and one pump are adequate and appropriate, the $300,000 in equipment cost shown in Table 3 of the application adequately covers necessary equipment costs; that the 2,229 gross square feet to be renovated, as shown in the line drawing in the application, is adequate for creating the room shown in the drawing,(i.e., one operating room, one recovery room, a pump room, an observation room, a sub-sterile storage area, a scrub area, and a nurses station), and the renovations can be accomplished for $299,970. The parties also stipulated that Plantation General's bad debt projections, policy adjustments and contractual adjustments contained in is pro forma are reasonable if the gross revenue projection is accurate. The salary projections per full- time equivalent found on Table 11 for staff are reasonable but the parties did not agree that the number of positions or the distribution of staff is appropriate. The perfusionist charge is reasonable, and the depreciation cost is correctly stated in the application. The projections of the percentage of utilization by payor class found in the application is reasonable. The areas of contention are the long and short term feasibility of the project based upon Plantation's projected charges, and the accuracy of Plantation's projected expenses. Plantation projects it will perform 184 open heart surgeries in its first year of operation and 312 in the second year. The anticipated average charges are $34,860 in the year beginning July, 1990 and $36,603 in the year beginning July, 1991. These charges were calculated by an outside consultant who has no control over the actual charges which the hospital may establish if the program is implemented. The average charge was predicated upon an examination of Florida Health Care Cost Containment Board data pertaining to the DRGs for open heart surgery reported by the five Broward open heart providers during the third quarter of 1986. The charges ranged from a low of $29,063 at North Ridge to a high of $39,208 at Hollywood Memorial. The projection of average charges is inherently imprecise, but is useful to analyze whether, if Plantation charged patients an amount within the range of the average actual charges within the district, the project would be financially feasible. Plantation does not guarantee that its charges will be no more than the average charges. Its total income will vary based upon the mix of cases and the types of patients it serves. Based on the anticipated charges, Plantation calculated the incremental cost associated with the project. The incremental revenue to the hospital (that is, the revenue generated by the facility with the open heart surgery program as opposed to revenue that will be realized without the program) should be $6,414,240 in the first year and as much as $11,420,136 in the second year. This calculation is necessary in order to determine whether costs would exceed the likely charges, which would clearly affect the financial feasibility of the project. Plantation projected that these costs and deductions from revenue would be $2,919,293 the first year and $5,286,554 in the second year. It is quite likely that Plantation would perform 184 surgeries during the first year and it is reasonable to assume it could achieve the projected 312 surgeries in the second year. Plantation's average charges as set forth in the application may be low. Plantation General's charges are, on balance, about 20% higher than the charges at North Ridge. This would mean that the average charge for Plantation General's first year of operation would be $42,708 rather than $34,860. It might have been better if Plantation General had developed a charge comparison taking into account the cost per adjusted admission by using the case mix index published by the Florida Health Care Cost Containment Board. The failure to use that adjustment is not that significant given the inherent "softness" in the projection of patient charges. Plantation General's projected charges found in Finding 42 are reasonable. What is much more significant is the questionable nature of Plantation General's expenses. The Intervenors have argued that the applicant's cost projections fail to include costs associated with non-revenue producing Departments, such as pharmacy, laboratory, X-ray, nuclear medicine, respiratory therapy, EKG, cardiac catheterization and pathology, dietary and medical records. In essence, the Intervenors claim that the only expenses which are acknowledged by Plantation General are incremental costs from instituting the open heart program, but not the true cost. Plantation General presented the testimony of Mr. Tharpe, who prepared the cost analysis. He testified that he included the cost of supplies, laboratory and all other ancillary areas that provide services to patients by taking the projected income from the open heart surgery program, and comparing it to the projected income of the entire hospital. The actual 1988 hospital revenues were inflated by 5% a year to estimate the hospital's 1990-91 revenue. Open heart revenues would then constitute about 7% of total hospital revenues. He used this percentage to estimate the cost that would be associated with using non-revenue generating departments. This 7% ratio was not applied to fixed overhead cost such as the mortgage costs or the cost of hospital administration, because those costs would be incurred whether or not Plantation operated an open heart program. Neither did he apply the 7% ratio to other cost centers such as the obstetrics or pediatrics departments. In this way, Mr. Tharpe claimed he allocated the cost for all routine and ancillary areas which would provide services to open heart patients. This analysis is unpersuasive. Followed it to its logical conclusion, no new program would ever have to account for its share of the ongoing cost of the hospital imbedded in fixed overhead, such as mortgage, administration, power, or interest charges. It provides a convenient excuse for the hospital to understate expenses and thereby make a new service look more profitable, and therefore more likely to be financially viable in both the short and long terms. A better way to perform cost analysis is to use a step-down cost analysis. This procedure allocates overhead of non-revenue departments to revenue departments to get fully costed figures for delivering services within each hospital department. This step-down cost analysis is a generally accepted accounting procedure and is one required by Medicare. The statistical basis of step-down cost analysis avoids the inherent oversimplification in the assumption that costs are linear, i.e., that all costs and charges have the same relationship to each other within the hospital. Without necessarily accepting Mr. Newman's projection that the fully allocated cost of open heart surgery at Plantation General would be $22,800 per case and not $12,800 per case, the is persuasive that the expense projections of Plantation General are unrealistic, and understated. It is not possible, based on the record made, to determine what the actual expense would be. Due to this failure of proof, it is therefore impossible to determine whether the project is feasible in the long or short term. While open heart surgery is often a very profitable service, in the absence of persuasive evidence on the cost of providing open heart surgery services, it would be inappropriate to assume that the project would be sufficiently profitable that it would be financially feasible in the short or long terms. Needs and circumstances of facilities providing a substantial portion of their services to persons not residing in the service area. Section 381.705(1)(k), Florida Statutes. The prehearing stipulation states that this criteria is an issue, but it really is not. Although other hospitals such as North Ridge and Florida Medical Center provide services to patients from Palm Beach County, the effect of the project on them is not relevant under this criteria. This criteria focuses on the effect of the establishment of a new service at Plantation General on other providers located outside District X, Broward County. There is no proof that it will have any such effect. Probable impact of the proposed project on the cost of providing the service, including the effect on competition. Section 381.705(1)(l), Florida Statutes. The introduction of another provider of open heart surgery will provide the potential for additional price and non-price competition among providers of open heart surgery services. The major purchasers are really not the individuals who have surgery, but the managed care plans, such as HMOs and PPOs, which negotiate with hospitals on behalf of their subscribers. Plantation General currently has contracts with about 25 managed care plans and receives about 30% of its revenue from those plans. This is an indication that the market regards Plantation as a competitive provider. On the other hand, Florida Medical Center, which is its closest competitor geographically, is not actively seeking managed care contracts and has not added any for the last eighteen months. The addition of Plantation General would be consistent with the statutory directive to foster increased competition among health care providers. The Hearing Officer also accepts Dr. Zaretsky's testimony that even if all 184 surgeries which Plantation General projects it will perform during its first year were drawn from Florida Medical Center or, in the alternative, from North Ridge, neither hospital would suffer such a significant loss of revenue which should weigh against the approval of Plantation General's open heart surgery program. The analysis does not end there, however. Plantation General is likely to enter the market for open heart surgery with a substantial market share, a share equal to the number of surgeries it now refers out to existing providers. In that case, Florida Medical Center's number of open heart surgeries will fall below the 350 per year quality standard during both the first and second year of Plantation General's new program. Florida Medical Center will only stay above the 350 surgery standard if it increases its market share substantially, or if Plantation fails to meet its own market share projections. Both are unlikely. Based upon the Department's Rule 10- 5.011(1)(f)11b: No additional open heart surgery programs shall be approved which would reduce the volume of exis heart surgery facilities below 350 o procedures annually for adults . . . . Plantation General's program therefore conflicts with this portion of the Department's rule. Costs and methods of construction. Section 381.705(m), Florida Statutes. Based on the stipulation of the parties, the proposed renovations represent conventional construction methods that are not unreasonable. Neither the cost nor the methods of construction for the renovation of the 2,229 gross square feet have been put in issue. The costs are, however, understated to the extent that they do not provide for adequate construction, i.e., the need for a second operating room. See, Findings 31 and 32, above. Applicants past and proposed provision of services to Medicaid and indigents clients. Section 381.705(1)(n), Florida Statutes. According to the stipulation of the parties, the extent of Plantation General's commitment to make open heart surgery available to Medicaid or medically indigent neither enhances nor detracts from its project. (Stipulation at paragraph 25). Less costly, more efficient alternatives. Section 381.705(2)(a), Florida Statutes. There is no alternative to open heart surgery when it is medically indicated. It is more efficient to deny Plantation General's application and let existing providers absorb whatever increase there may be in the population seeking open heart surgeries. This is especially significant because the proposal would drop Florida Medical Center below the 350 surgeries per year and because Broward General is not currently operating with an existing current volume of 350 adult open heart surgeries per year. See, Rule 10- 5.011(1)(f)11.a.(I), b., Florida Administrative Code. Appropriateness and the efficiency of the existing facilities. Section 381.795(2)(b), Florida Statutes. The existing open heart surgery programs in Broward County have the capacity to perform additional open heart surgeries. See, Findings 20-22 above. The expansion of those facilities, especially in view of Broward General's failure to meet the 350 surgery minimum volume requirement of Rule 10- 5.011(f)11.a.(I), Florida Administrative Code, weighs against approval of the application. The denial of Plantation's application may have an effect on Broward General's number of surgeries, for a limitation on the number of providers should have the effect of directing more surgeries to Broward General. This assumption is inherent in the rule. Alternative to new construction. Section 381.705(2)(c), Florida Statutes. As with the preceding paragraph, the expansion of existing services such as that of Broward General is an alternative to the capital expenditures and related labor costs incident to the opening of an open heart surgery program at Plantation General. Problems facing patients in the absence of this proposal Section 381.705(2)(d), Florida Statutes. There is no evidence of any problem of geographic access, and no evidence that the opening of this program will improve, in any substantial degree, financial access to underserved populations, nor is there evidence of a need for additional programs because the existing programs are at capacity. That, from time to time, Florida Medical Center is unable to admit patients who doctors at Plantation General would like to transfer there does not show that there is a problem obtaining open heart surgery in the service district. Florida Medical Center is not the only other provider of open heart surgery. The problem which patients having catheterization at Plantation General face if they need open heart surgery is inherent in Plantation General's decision to establish the cardiac catheterization program when it did not also have approval for open heart surgery, and cannot be used to bootstrap the present application. Rule Criteria for Evaluating Certificate of Need Applications. Need. Rule 10-5.011(1)(f)2, 8, and 11, Florida Administrative Code. The rule on open heart surgery states, in part that: The department will not normally approve applications for new open heart surgery programs unless the conditions of sub-paragraphs 8. and 11. below, are met. There is no persuasive proof that the situation in Broward County is abnormal, due to an unavailability or inaccessibility to open heart surgery services. There is no over-crowding at existing providers, or some quality of care problem with an existing provider which causes potential patients to shun a program. Neither is there a monopoly in the district which should be broken up to provide consumers of health care choice and generate competition. The only circumstance which might be characterized as abnormal is the recognition that Broward General has had its program for a substantial time but has not yet achieved an annual volume of 200 open heart procedures, the volume which is the ordinary minimum for a quality program. See Rule 10-5.011(1)(f)5d., Florida Administrative Code . There is no testimony that the care offered by Broward General is inadequate, or that it is somehow inaccessible, which accounts for the low number of procedures. The rule provides a mathematical calculation for the need for additional open heart providers in a service area. Rule 10-5.011(1)(f)8., Florida Administrative Code. It calculates a base period: The twelve-month period beginning 14 months prior to the filing of the hospital's letter of intent. This is the period July 1, 1987, through June 30, 1988. During the base period, 2,146 open heart surgeries were performed in Broward County. (See, Finding 14.) The population of the county at the mid-point of this period, January 1, 1988, was 1,198,243 persons. This results in a use rate in Broward County of 179.1 open heart surgeries per 100,000 population. Based upon an anticipated opening of services in July 1990, the county population at that time is projected to be 1,247,226 persons. Multiplying the use rate by the projected population yields a need for 2,233 open heart surgeries in Broward County in 1990. This number is then divided by 350 procedures per facility to assess the number of facilities needed; there is a need for 6.4 open heart programs and there are presently five open heart providers. According to the formula in sub- subparagraph 8 one additional provider may be approved. This need assessment, however, is not controlling. Other portions of the rule place limits on the need for additional programs, even when the need calculation in subparagraph 8 supports adding a provider. Rule 10-5.011(1)(f)11, Florida Administrative Code, states in pertinent part: There shall be no additional open heart surgery programs established unless: The service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart surgery cases per year..., b. No additional open heart surgery program shall be approved which would reduce the volume of open heart surgery facilities below 350 open heart procedures annually.... The text of the rule requires "each" provider to operate at 350 cases per year before another program is approved. There is no mention of any averaging of the total number of cases under sub-subparagraph 11a in determining whether the requirement is met. Averaging the number of open heart surgeries in each program makes little sense in the context of the entire rule. There would be no need for both sub-subparagraphs 11a(I) and b, for if there is a need in the district, each existing and approved open heart surgery program in a district must be handling 350 procedures on average. The 350 surgery standard in the rule was adopted based upon the National Health Planning Guidelines issued in March, 1978. These guidelines approved recommendations of the Intersociety Commission on Heath Disease Resources, which state: In order to prevent duplication of costly resources which are not fully utilized, the opening of new units should be contingent upon existing units operating and continuing to operate at a level of least 350 procedures per year. Those Guidelines also state that additional open heart surgery services should not be permitted unless existing services are operating at, and will continue to operate at a minimum of 350 surgeries per year. Sub-paragraph 11 of the rule is clear; each provider must operate at a level of 350 cases annually before another applicant will be approved. Plantation General's application fails in two respects: Broward General is currently providing less that 350 surgeries per year, and if Plantation is approved, both Broward General and Florida Medical Center will fall below the 350 standard. Plantation General has failed to prove that any circumstances at Broward General are so abnormal that the "not normal" fail-safe provision of Rule 10-5.011(f)2., Florida Administrative Code, should come into play. Mr. Nelson, the health planner for Plantation General attempted to show that the opening of the program at Plantation should not cause the annual number of surgeries done at Florida Medical Center to fall below 350. That testimony was not as credible as the testimony of Ms. Lamb, or especially the testimony of Dr. Luke. Mr. Nelson's analysis assumed that the open heart surgery use rate would continue to increase at the same rate that it had increased in the past. This is not a reasonable assumption. It is likely that the use rate in Broward County will decline, not increase, for a number of reasons, including the prevention of heart disease through wellness trends, the increased use of alternative therapy such as angioplasties, and the affect that utilization reviews and cost containment measures have had on the number of open heart surgery. Moreover, Broward County has a higher use rate than the state average, which is also substantially higher than the use rate in Palm Beach County, although the populations of both counties are similar. The primary reason for Broward's high use rate has been that until recently Palm Beach County residents had to come to Broward County hospitals for open heart surgery. The opening of open heart surgery programs in Palm Beach County will continue to depress the Broward County use rate. Taken as a whole, the need methodology found in the rule, consisting of the need determination in Rule 10-5.011(1)(f)8, and the further cutoff provisions found in sub-subparagraphs 11a and b show that there is no need for an additional open heart surgery program in Broward County. Service availability. Rule 10-5.011(1)(f)3, Florida Administrative Code. By use of a single operating room, Plantation General's proposed program is not capable of providing 500 open heart operations per year, as required by Rule 10-5.011(1)(f)3d, Florida Administrative Code. Theoretically the program could serve two cases per day, five days a week for 52 weeks a year, and thus handle a total of 520 cases. This ignores, however, the necessity to leave the single operating room available for open heart backup when angioplasty procedures are going on. The hospital projects and should achieve a substantial volume of angioplasty if the open heart program is approved. (See, Finding 26, above.) Even Plantation General, in its proposed recommended order, acknowledged "that it is most unlikely that Plantation could actually do 500 cases per year in a one operating room open heart program." (Proposed Finding 66.) Plantation General argues, however, that it is only necessary that the room have "the capacity to do that many [500] cases." Id. If Plantation had proposed to use the room solely for open heart surgeries, without also having to make its operating room available for its projected volume of angioplasty, Plantation General's argument might prevail. Because Plantation General does propose a substantial volume of angioplasties, the backup time necessary for those cases must be taken into account. The proposal it has made does not meet the rule requirement that its program be capable of providing 500 surgeries per year. Service accessibility. Rule 10-5.011(1)(f)4, Florida Administrative Code. The rule requires that "open heart surgery shall be available to all person in need." Rule 10-5.011(1)(f)4d, Florida Administrative Code. The level of commitment to indigent care in Plantation General's application neither enhances nor detracts from its application. This has been stipulated by all parties. Travel time for surgery is not a problem in Broward County, and the service would meet the requirement for hours of operation. Rule 10- 5.011(1)(f)4a, and b, Florida Administrative Code. The single operating room with a single heart-lung oxygenator pump means that emergency procedures cannot be done within a maximum of 2 hours waiting time. An open heart operation takes more than 5 hours, an angioplasty takes 3 hours or more. Once the operating suite is committed to one of those procedures, no emergency procedure can be performed within 2 hours. The proposal fails to meet Rule 10-5.011(1)(f)4c, Florida Administrative Code. Service quality. Rule 10-5.011(1)(f)5, Florida Administrative Code. The application meets the requirements of Rule 10-5.011(1)(f)5a that the hospital be accredited by the Joint Commission on the Accreditation of Hospitals. It has not met the requirement of Rule 10-5.011(1)(f)5b that "any applicant proposing to establish an open heart surgery program must document that adequate numbers of properly trained personnel will be available to perform in the following capacities...." The application only states that the necessary personnel will be available (Application, at 21-22), but does not reveal how Plantation General proposes to staff its program, especially with experienced nurses. Similarly, another subportion of the rule on service quality requires that "any hospital proposing or operating an open heart surgical program shall have a written plan specifying projected caseloads and projected space, support, equipment and supply needs for the open heart surgical procedures and patients." Rule 10-5.011(1)(f)5e, Florida Administrative Code. No such plan was included in its application; instead Planation proposes to draft its plan following the approval of its certificate of need. (Application at 22). This is improper, for the adequacy of the plan cannot be analyzed as the application is being considered. This is especially significant in terms of a plan for operating the program with a single heart-lung oxygenator pump. How the hospital expects to operate the program with no second pump for emergencies, or for use while the first pump is under ordinary maintenance is a significant deficiency. The application therefore fails to meet this portion of the rule. Cost effectiveness. Rule 10-5.011(1)(f)6, Florida Administrative Code. It is likely that the charges made by Plantation General will be in line with those from other competitive providers of open heart surgery in the Broward County area. Market forces would prevent Plantation from charging more than the going rate. There is insufficient evidence, based on Plantation General's present charge structure, to find that its charges would be appreciably below the cost of other providers. There is no undertaking in its application to charge no more than the $34,860 per case found in Table 8 of its application. (Application page 71). The application meets Rule 10- 5.011(1)(f)6b, Florida Administrative Code. Consistency with state and local health plans. Rule 10-5.011(1)(f)7, Florida Administrative Code. The plan is consistent with the state and local health plans. See, Finding 16, above.
Recommendation It is RECOMMENDED that the application of Plantation General for certificate of need No. 5736 to implement an open heart surgery program in HRS District X be denied. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 29th day of June, 1990. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 1990. APPENDIX Rulings on findings proposed by the Petitioner, Plantation General Hospital. 1. Adopted in Finding of Fact 1. 2. Adopted in Finding of Fact 3. 3. Adopted in Finding of Fact 4. 4. Adopted in Finding of Fact 2. 5. Adopted in Finding of Fact 7. 6. Adopted in Finding of Fact 8. 7. Adopted in Finding of Fact 9. 8. Adopted in Finding of Fact 12. 9. Adopted in Finding of Fact 14, with a correction for the number of procedures at Memorial Hospital. To the extent necessary, adopted in Findings of Fact 12 and 13. Adopted in Finding of Fact 15. Adopted in Finding of Fact 67. Adopted in Finding of Fact 15. Rejected as subordinate to other findings. Adopted in Finding of Fact 16. Adopted in Finding of Fact 17. Rejected for the reasons stated in Findings of Fact 18 and 19. Discussed in Findings of Fact 20 through 23. Rejected because there is no service availability problem and the economic access of Plantation would add as minimal. Generally adopted in Finding of Fact 24. Rejected as argument. Rejected for the reasons stated in Finding of Fact 32. Rejected, the proposal to have only one heart-lung pump is a serious deficiency, especially due to the failure to have developed as part of the application the written plan required by Rule 10-5.011(1)(f)5d, Florida Administrative Code. To the extent necessary, discussed in Finding of Fact 34. Rejected for the reasons stated in Findings of Fact 37 and 38. Rejected for the reasons stated in Findings of Fact 37 and 38. The testimony of Ms. Levine that staff could be hired without substantial difficulty is rejected. Rejected as unnecessary. Rejected as unnecessary, the prior application is not at issue. It is true and no competing service would be required to shut down its operations do to the inability to hire skilled nurses. Otherwise rejected for the reasons found in Findings of Fact 37 and 38. Rejected, the salaries are reasonable, but the new program is likely to raid other programs and cause an upward pressure on salaries as explained in Finding of Fact 39. To the extent necessary, discussed in Finding of Fact 37, especially as related to hiring recent nursing graduates or using agency nurses. Rejected as unnecessary, see Finding of Fact 39. Adopted in Finding of Fact 15. Rejected as unnecessary. Sentences 1 and 2 adopted in Finding of Fact 40. Dr. Lukes' testimony with respect to intending to spend 5 million dollars on the open heart program is not persuasive. Adopted in Finding of Fact 40. (As amended), generally adopted in Findings of Fact 42 and 44. The 184 surgeries is adopted in Finding of Fact 42; Plantation's evidence with respect to likely charges is accepted in Findings of Fact 42 and 46. The Intervenors' argument has been accepted, see Findings of Fact 47 and 48. Rejected for the reasons stated in Finding of Fact 48. Rejected as unnecessary. Rejected for the reasons stated in Finding of Fact 48. Rejected for the reasons stated in Finding of Fact 48. Discussed in Finding of Fact 48, but rejected. Rejected as unnecessary. Rejected because the question is not whether the intervenors proved that the proposed program is not financially feasible. The question is whether Plantation General proved that the program is financially feasible, and its proof is not persuasive. Rejected for the reasons stated in Finding of Fact 49. Accepted in Finding of Fact 50. Adopted in Finding of Fact 50. Rejected as unnecessary. Adopted in Finding of Fact 50. Generally accepted in Finding of Fact 50. Rejected; the testimony of Mr. Knapp has not been accepted on Doctor Zaretsky's cost analysis. Rejected, see Finding of Fact 35. Rejected as unnecessary. Adopted in Finding of Fact 52. To the extent necessary, covered in Finding of Fact 53. Sentence 1, adopted in Finding of Fact 54. The remainder rejected as unnecessary. Discussed in Finding of Fact 54. Discussed in Findings of Fact 20 through 22 and 55 and 56. Adopted in Finding of Fact 57. Rejected because there is insufficient proof patients would face serious problems in obtaining open heart surgery if Plantation's program is not approved. See Finding of Fact 19. Not an issue. Rejected as unnecessary. Rejected as unnecessary. Rejected for the reasons stated in Finding of Fact 64. Adopted in Finding of Fact 17. Rejected for the reasons stated in Finding of Fact 66. Rejected as cumulative. Rejected for the reasons stated in Finding of Fact 67, although Plantation would exceed 200 cases per year within 3 years of instituting service. Rejected, see Findings of Fact 20-23. Adopted as modified in Finding of Fact 68. Adopted in Finding of Fact 69. Adopted in Finding of Fact 60. Adopted in Finding of Fact 14, final sentence rejected as unnecessary. The averaging technique is rejected, see Finding of Fact 61. Rejected for the reasons stated in Finding of Fact It is not clear what factors were used by Hollywood Memorial to justify its open heart program. It is a major indigent care provider, which Plantation General is not. Rejected, see Findings of Fact 56 and 63. Rejected for the reasons stated in Finding of Fact 63. Rejected for the reasons stated in Finding of Fact Dr. Luke's testimony about the reduction in use rates was persuasive. Rejected as unnecessary. Rejected, it is not likely that the use rate in Broward County will continue to grow, or that a use rate for western Broward County should be separately calculated or analyzed. Rejected for the reasons stated in Finding of Fact 63. Rejected for the reasons stated in Finding of Fact 63. Rejected because the drop below 350 is significant according to the text of the rule and is not entitled to more than "slight" weight; other factors also weigh against the application. Rejected as unnecessary. Rulings of findings proposed by North Ridge General Hospital. 1-3. Rejected as unnecessary. Adopted in Finding of Fact 1. Adopted in Finding of Fact 1. Adopted in Finding of Fact 1. Adopted throughout the Findings of Fact. Adopted in the preliminary statement. Rejected as unnecessary. Rejected as a restatement of the rule. Rejected as a restatement of the rule. Rejected as a restatement of the rule. Rejected as a conclusion of law. Adopted in Finding of Fact 60. Adopted in Finding of Fact 60. Rejected as a statement of argument. Rejected as a statement of argument.' Rejected as unnecessary, see also Finding of Fact 63. Rejected as unnecessary. Rejected as inconsistent with the Department's current view of law. Rejected as unnecessary. Adopted in Finding of Fact 62. Rejected as unnecessary. The projection of 184 cases is adopted in Finding of Fact 42. The use rate is discussed in Finding of Fact 63. Rejected as unnecessary. Rejected as unnecessary, see Finding of Fact 63. The testimony of Dr. Luke on the point was the most persuasive. Rejected as unnecessary. Rejected, see Finding of Fact 60. Rejected as unnecessary. Discussed in Finding of Fact 63. 31-56. Generally discussed in Finding of Fact 60 as it relates to the proper calculation of need under the rule. See also Finding of Fact 51 concerning Florida Medical Center falling below 350 surgeries. Discussed in Finding of Fact 15. Discussed in Finding of Fact 12. Rejected as unnecessary. Discussed in Finding of Fact 64. Generally adopted in Findings of Fact 20 through 22. Adopted in Findings of Fact 10 and 23. Adopted in Finding of Fact 21. Adopted in Finding of Fact 22. Adopted in Finding of Fact 23. Stipulated by the parties. Adopted in Finding of Fact 17. The quality of care was stipulated by the parties. Rejected as unnecessary. Rejected as unnecessary. Rejected as unnecessary. Rejected as unnecessary. Rejected as unnecessary. Adopted in Finding of Fact 3. 75-90. Rejected as unnecessary. The question of demand is resolved in Finding of Fact 19. While cardiologists at the hospital may wish to provide angioplasty, which requires open heart surgery, that desire is not relevant. See Finding of Fact 18. Similarly, the testimony of Dr. Honderick that a facility which offers cardiac catheterization should have the ability to render surgical intervention in case of a complication is not relevant. Plantation General knew when it establishes a catheterization lab, without open heart approval, that such problems would occur. The hospital cannot bootstrap these problems into a justification for open heart surgery. They were problems that the hospital knowingly assumed. 91-98. Addressed in Findings of Fact 26 through 31. 99 Adopted in Finding of Fact 32. 100. Rejected as unnecessary. 101. Adopted in Finding of Fact 33. 102. Adopted in Finding of Fact 25. 103. Adopted in Finding of Fact 67. 104. Rejected as unnecessary. 105. Addressed in Finding of Fact 66. 106. Addressed in Findings of Fact 37 and 38. 107. Addressed in Finding of Fact 31. 108-111. Adopted in Finding of Fact 38. 112. Adopted as modified in Finding of Fact 37. 113. Adopted as modified in Finding of Fact 37. 114. Adopted in Finding of Fact 42 and 43. 115. Adopted in Finding of Fact 42 and 43. 116. Adopted in Finding of Fact 44. 117. Adopted in Finding of Fact 44. 118. Rejected as unnecessary. 119. Rejected as unnecessary. 120. Adopted as modified in Finding of Fact 46. 121-131. Discussed in Findings of Fact 46 and 50. 132. Adopted in Finding of Fact 59. 133. Discussed in Finding of Fact 59. 134. Discussed in Finding of Fact 59. 135. Rejected as unnecessary. 136. Addressed in Finding of Fact 59. Rulings on findings proposed by Florida Medical Center. Covered in preliminary statement. Covered in Finding of Fact 12. Covered in Finding of Fact 1 Discussed in Finding of Fact 12. Rejected as unnecessary. Adopted in Findings of Fact 17 and 18. To the extent appropriate, discussed in Findings of Fact 19 and 21. Covered in Finding of Fact 19. Adopted in Finding of Fact 23. 10-13. Discussed, to the extent appropriate, in Finding of Fact 46. Rejected because although true, the magnitude of the income resulting from those DRGs was not explained sufficiently. The matter of charges is more significant in determining financial feasibility than efficiency here. Implicit in Findings of Fact 44 and 46. Implicit in Finding of Fact 23. Adopted in Finding of Fact 17. Rejected as unnecessary. Adopted in Finding of Fact 17, but the second sentence is rejected as unnecessary in view of the stipulation. Generally adopted in Findings of Fact 14, 32 and 64. Adopted in Findings of Fact 18 and 23. Implicit in Finding of Fact 23. Adopted in Finding of Fact 23. Adopted in Findings of Fact 6 and 35. Adopted in Finding of Fact 35. Adopted in Finding of Fact 35. Adopted in Finding of Fact 33. Rejected as unnecessary. Adopted in Findings of Fact 37 and 38. Adopted in Finding of Fact 48. Adopted in Finding of Fact 42. Rejected as unnecessary. The legal expense would be minimal. Adopted in Finding of Fact 48. Generally adopted in Finding of Fact 48. Adopted in Finding of Fact 48. Discussed in Finding of Fact 48. Adopted in Finding of Fact 48. Rejected as unnecessary. Adopted in Finding of Fact 51. Subordinate to Finding of Fact 63. Adopted in Finding of Fact 51. Rejected as unnecessary. Rejected as unnecessary. Rejected as unnecessary. It is stipulated that Florida Medical Center has standing. Rejected as unnecessary. Adopted in Finding of Fact 17. Addressed in Finding of Fact 58. Adopted in Finding of Fact 49. Adopted in Finding of Fact 49. Adopted in Finding of Fact 49. Discussed in Finding of Fact 59. Discussed in Finding of Fact 64. Adopted in Finding of Fact 17. Adopted in Finding of Fact 67. Adopted in Finding of Fact 67. Discussed in Finding of Fact 60. The division by 350 is implicit in the structure of the rule to determine the number of programs. The use rate proposed by Mr. Nelson has been rejected. The appropriate calculation is found at Finding of Fact 60. Adopted in Finding of Fact 63. Adopted in Finding of Fact 63. Adopted in Finding of Fact 63. Adopted in Finding of Fact 60. Adopted in Finding of Fact 61. Rejected as irrelevant. Adopted in Findings of Fact 60 and 63. COPIES FURNISHED: Jay Adams, Esquire 1519 Big Sky Way Tallahassee, FL 32301 Richard C. Bellak, Esquire FOWLER, WHITE, GILLEN, BOGGS, VILLAREAL & BANKER, P.A. 101 North Monroe Street Suite 910 Tallahassee, FL 32301 Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, FL 32308 Eric B. Tilton, Esquire 214B East Virginia Street Tallahassee, FL 32301 Michael J. Cherniga, Esquire ROBERTS, BAGGETT, LAFACE & RICHARD 101 East College Avenue Post Office Drawer 1838 Tallahassee, FL 32302 Jack M. Skelding, Esquire PARKER, SKELDING, LABASKY & CORRY 318 North Monroe Street Post Office Box 669 Tallahassee, FL 32302 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, FL 32399-0700
The Issue Whether there is need for a new Pediatric Heart Transplant and/or Pediatric Heart and Lung Transplant program in Organ Transplant Service Area (OTSA) 3; and, if so, whether Certificate of Need (CON) Application No. 10471 (heart) and/or 10472 (heart and lung), filed by The Nemours Foundation, d/b/a Nemours Children’s Hospital (Nemours or NCH), to establish a Pediatric Heart Transplant and/or Pediatric Heart and Lung Transplant program, satisfy the applicable statutory and rule review criteria for award of a CON.
Findings Of Fact Based upon the demeanor and credibility of the witnesses and other evidence presented at the final hearing and on the entire record of this proceeding, the following Findings of Fact are made: The Parties The Applicant, Nemours Nemours Children’s Hospital is a licensed Class II specialty children’s hospital located in Orange County, Health Planning District 7, Subdistrict 7-2, OTSA 3, which is owned and operated by The Nemours Foundation. Nemours is licensed for 100 beds, including 73 acute care, nine comprehensive medical rehabilitation, two Level II neonatal intensive care unit (NICU), and 16 Level III NICU beds, and is a licensed provider of pediatric inpatient cardiac catheterization and pediatric open-heart surgery. As the primary beneficiary of the Alfred I. duPont Testamentary Trust established in the will of Alfred duPont, the Foundation was incorporated in Florida in 1936. The Foundation set out to provide children and families medical care and services, its mission being “[t]o provide leadership, institutions, and services to restore and improve the health of children through care and programs not readily available, with one high standard of quality and distinction regardless of the recipient’s financial status.” Foundation assets reached $5.5 billion, by the end of 2015. The Foundation has funded $1.5 billion of care to Florida’s pediatric population through subspecialty pediatric services, research, education, and advocacy. Nemours has established a pediatric care presence throughout the State of Florida. Nemours operates over 40 outpatient clinics throughout Florida that offer primary care, specialty care, urgent care, and cardiac care services to pediatric patients in central Florida, Jacksonville, and the panhandle region. Nemours also provides hospital care to pediatric inpatients at Nemours Children’s Hospital in Orlando, as well as through affiliations with Wolfson’s Children’s Hospital in Jacksonville, West Florida Hospital in Pensacola, and numerous hospital partners in central Florida. The resources Nemours offers in the greater Orlando area are especially significant with 17 Primary Care Clinics, five Urgent Care Clinics, 10 Specialty Care Clinics, nine Nemours Hospital partners, and, of course, NCH itself. These clinics are located throughout OTSA 3 where Nemours determined access to pediatric care was lacking, including Orlando, Melbourne, Daytona Beach, Titusville, Kissimmee, Lake Mary, and Sanford, as well as neighboring Lakeland. The clinics are fully staffed with hundreds of Nemours-employed physicians who live in the clinic communities. Through these satellite locations, as well as the Nemours CareConnect telemedicine platform, Nemours is able to bring access to its world-class subspecialists located at NCH to children throughout the State of Florida who otherwise would not have access to such care. Nemours was established to provide state of the art medical care to children through its integrated model. Nemours’ development has been and continues to be driven by its mission and objective to be a top-tier, world-class pediatric healthcare system. NCH is the first completely new “green field” children’s hospital in the United States in over 40 years, allowing Nemours to integrate cutting-edge technology and a patient-centered approach throughout. Nemours has created a unique integrated model of care that addresses the needs of the child across the whole continuum, connecting policy and prevention, to the highest levels of specialized care for the most complex pediatric patients. From its inception, Nemours envisioned the development of a comprehensive cardiothoracic transplant program as proposed by the CON applications at issue in this proceeding. NCH is located in the Lake Nona area, just east of downtown Orlando in a development known as Medical City. Medical City is comprised of a new VA Hospital, the University of Central Florida (UCF) College of Medicine and School of Biomedical Sciences, the University of Florida (UF) Research and Academic Center, the Sanford Burnham Medical Research Institute, and a CON-approved hospital, which is a joint venture between UCF and AHCA, which will serve as UCF’s teaching hospital. Medical City is intended to bring together life scientists and research that uses extraordinarily advanced technology. Co- location in an integrated environment allows providers and innovators of healthcare, “the brightest minds,” so to speak, to interact and to share ideas to advance healthcare and wellness efforts. Agency for Health Care Administration AHCA is the state health-planning agency that is charged with administration of the CON program as set forth in sections 408.031-408.0455, Florida Statutes. Context of the Nemours Applications Pursuant to Florida Administrative Code Rule 59C-1.044, AHCA requires applicants to obtain separate CONs for the establishment of each adult or pediatric organ transplantation program, including: heart, kidney, liver, bone marrow, lung, lung and heart, pancreas and islet cells, and intestine transplantations. “Transplantation” is “the surgical grafting or implanting in its entirety or in part one or more tissues or organs taken from another person.” Fla. Admin. Code R. 59A-3.065. Heart transplantation, lung transplantation, and heart/lung transplantation are all defined by rule 59C-1.002(41) as “tertiary health services,” meaning “a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost effectiveness of such service.” AHCA rules define a “pediatric patient” as “a patient under the age of 15 years.” Fla. Admin. Code R. 59C-1.044(2)(c). AHCA rules divide Florida into four OTSAs, corresponding generally with the northern, western central, eastern central, and southern regions of the state. Fla. Admin. Code R. 59C-1.044(2)(f). The programs at issue in this proceeding will be located in OTSA 3, which is comprised of Brevard, Indian River, Lake, Martin, Okeechobee, Orange, Osceola, Seminole, and Volusia Counties. Currently, there are no providers of PHT in OTSA 3, and there are no approved PHLT programs statewide. The incidence of PHT in Florida, as compared to other types of solid organ transplants, is relatively small. The chart below sets forth the number of pediatric (ages 0-14) heart transplant discharges by year for the four existing Florida PHT programs during Calendar Years (CY) 2013 through 2016, and the 12-month period ending June 2017: HOSPITAL HEART TRANSPLANT CY 2013 CY 2014 CY 2015 CY 2016 12 MONTHS ENDING JUNE 2017 All Children’s Hospital 7 14 9 8 7 UF Health Shands Hospital 6 8 15 15 9 Memorial Regional Hospital 5 5 5 7 4 Jackson Health System 2 2 1 4 1 Total 20 29 30 34 21 The above historic data demonstrates that the incidence of PHT statewide is relatively rare, and does fluctuate from program to program and from year to year. As can be seen, the most recent available 12-month data reflects that only 21 PHTs were performed during that time, for an average program volume of only 5.25 cases. Florida has more existing and approved PHT programs than every other state in the country except California, which has more than double the pediatric population of Florida. And like Florida, two of the California programs are extremely low- volume programs. Additionally, evidence regarding the number of PHLT patients demonstrated just how rare this procedure is. From 2013 to 2016, there was an annual average of only four PHLTs nationally, with only one actual transplant on a Floridian. Nemours’ health planner stated that although Nemours projected in its application that it would perform one heart/lung procedure each year, it is a “very low-volume service,” and Nemours in actuality expects that there will be years with zero volume of PHLT. The CON Applications Nemours filed its applications for heart transplantation, heart/lung transplantation, and lung transplantation in the second Other Beds and Programs Batching Cycle of 2016. Nemours is proposing the development of a comprehensive cardiothoracic transplant program, which will be the only such program in Florida. This will be achieved by combining three types of transplant services (heart, lung, and heart/lung) in one comprehensive cardiothoracic transplant program. Each application was conditioned on the development of all three transplantation programs. Nemours is located in OTSA 3, where there is currently no PHT provider, PLT provider, or PHLT provider. There are, however, three providers of pediatric open-heart surgery and pediatric cardiac catheterization, and a large, growing pediatric population. Unlike any other facility in Florida, the Nemours Cardiac Center (Cardiac Center) is uniquely organized to treat all forms of congenital heart disease. The Cardiac Center employs a “programmatic approach” to offer the most beneficial environment and the finest care available for pediatric patients. The Cardiac Center, physically located at NCH, throughout Florida, is organized as a single Department of Cardiovascular Services to house Cardiac Surgery, Cardiac Anesthesia, Cardiac Intensive Care Unit (ICU), and Cardiology. Cardiac Center physicians throughout Florida are organized as a single entity with the goal of providing the highest quality, patient-centered care to all patients without the usual barriers created by the departmental “silos.” The entire Cardiac Center clinical team, including nurses and physicians, is dedicated solely to the special challenges of congenital heart abnormalities and makes the care of children with heart disease the life’s work of team members. The fully integrated organizational structure permits the team to take shared responsibility for all aspects of the delivery of quality care to these pediatric patients from admission to discharge. The Cardiac Center holds weekly patient consensus conferences, where all providers, including physicians, nurses, and the patients’ caregivers, participate in case reviews of all inpatients and those patients scheduled for surgery or catheterization. The Cardiac Center is “state of the art” with a designated cardiovascular operating room, a designated cardiovascular lab that includes an electrophysiology lab, and a dedicated comprehensive care unit. In addition, The Foundation has furthered the commitment to the Cardiac Center by funding an additional $35 million expansion to the sixth floor of NCH, adding an additional 31 inpatient beds, an additional operating room, and a comprehensive cardiovascular intensive care unit. Dr. Peter D. Wearden joined Nemours in 2015 as the chief of cardiac surgery, chair of the Department of Cardiovascular Services, and director of the Cardiac Center at Nemours. Dr. Wearden will serve as director of the Comprehensive Cardiothoracic Transplant Program at Nemours and will be instrumental in the development and implementation of the program. Dr. Wearden was recruited from the Children's Hospital of Pittsburgh (CHP), where he served as the surgical director of Heart, Lung, and Heart/Lung Transplantation. He was also the director of the Mechanical Cardiopulmonary Support and Artificial Heart Program. CHP rose to a US News and World Report top 10 program during Dr. Wearden’s tenure. CHP is at the forefront of organ transplantation and is where the first pediatric heart/lung transplantation was performed. Dr. Wearden is a trained cardiothoracic surgeon who completed fellowships in both cardiothoracic surgery (University of Pittsburgh) and Pediatric and Congenital Heart Surgery (Hospital for Sick Children, Toronto, Canada). He is certified by the American Board of Thoracic Surgery and holds additional qualifications in Congenital Heart Surgery from that organization. In his tenure as a board-certified pediatric transplant specialist, he has participated in over 200 pediatric cardiothoracic transplantations, of which he was the lead surgeon in over 70. In addition, he has procured over $20 million in National Institutes of Health research funding since 2004 specific to the development of artificial hearts and lungs for children and their implementation as a live-saving bridge to transplantation. Dr. Wearden was a member of the clinical team that presented to the Food and Drug Administration (FDA) panel for approval of the Berlin Heart, the only FDA-approved pediatric heart ventricular assist device (VAD)1/ currently available, and he proctored the first pediatric artificial heart implantation in Japan in 2012. A VAD is referred to as “bridge to transplant” in pediatric patients because the device enables a patient on a waiting list for a donated heart to survive but is a device on which a child could not live out his or her life. Both utilization of VADs and heart transplantation procedures are in the “portfolio of surgical interventions” that can save the life of a child with heart failure. Dr. Wearden is an international leader in the research and development of VADs. Victor Morell, an eminent cardiac surgeon and chief of Pediatric Cardiac Surgery at CHP, testified that Dr. Wearden’s presence in Orlando alone and the work that he will be able to do with VADs and a PHT program will likely save lives. Many of the physicians that comprise the Nemours Cardiac Center transplant team not only have significant transplant experience, but also have experience performing transplants together. These physicians came with Dr. Wearden from CHP, were trained by Dr. Wearden, or otherwise worked with Dr. Wearden at some point in their careers. The physicians recruited to the Nemours transplantation team were trained at or hail from among the most prestigious programs in the country. For example, Dr. Kimberly Baker, a cardiac intensivist, was trained by Dr. Wearden in the CHP ICU. Dr. Constantinos Chrysostomou, Nemours’ director of cardiac intensive care, worked with Dr. Wearden at CHP, and has experience starting the pediatric ICU in Los Angeles at Cedar Sinai Hospital. Dr. Steven Lichtenstein, chief of cardiac anesthesia, held the same position at CHP for 12 years before he was recruited to Nemours. Dr. Karen Bender, a cardiac anesthesiologist, was recruited by Dr. Wearden from the Children’s Hospital of Philadelphia – one of the leading programs in the country. Dr. Michael Bingler, a cardiac interventionalist, was at Mercy Children’s Hospital in Kansas City for eight years. Dr. Adam Lowry of the Nemours cardiac intensive care center previously trained at both Texas Children’s Hospital (the number one program in the country) and Stanford. The 11 physicians that comprise the Cardiac Center’s Cardiothoracic Physician Team have collectively participated in 1,146 cardiothoracic transplantations. These physicians came to Nemours to care for the most acute, critically ill patients, including those requiring PHT. In addition to the physician team, the expertise and skill of the non-physician staff in the catheterization lab, the operating room, and the cardiac ICU are crucial to a successful program. Dr. Dawn Tucker is the administrative director of NCH’s Cardiac Center and heads the nursing staff for NCH’s Cardiac Center, which includes 23 registered nurses with transplant experience. Dr. Tucker holds a doctorate of Nursing Practice and was formerly the director of the Heart Center at Mercy Children’s Hospital in Kansas City, where she oversaw the initiation of a PHT program. The average years of experience for total nursing care in cardiac units across the nation is two years. The average years of experience in the Nemours Cardiac Center is eight years. Medical literature shows the greater the years of nursing staff experience, the lower the mortality and morbidity rates. The nursing staff at Nemours, moreover, has extensive experience in dealing not only with pediatric cardiac patients, but with pediatric heart transplants as well. The Cardiac Center’s cardiothoracic nursing staff has over 220 years of collective cardiothoracic transplant experience. Nemours operates a “simulation center” that allows the Cardiac Center to simulate any type of cardiac procedure on a model patient before performing that procedure on an actual patient. The model patient’s “heart” is produced using a three- dimensional printer that creates a replica of the heart based on MRI’s or other medical digital imaging equipment. These replica hearts are printed on-site, using the only FDA-approved software for such use, and are ready for use in the simulation center within a day after medical imaging. Nemours Cardiac Center currently performs what the Society of Thoracic Surgeons has coined “STAT 5” cardiac procedures. STAT 5 cardiac procedures are the most complex; STAT 1 procedures are the least complex. A PHT is a STAT 4 procedure. Since Dr. Wearden’s arrival at the Nemours Cardiac Center, there have been no patient mortalities. The uncontroverted evidence established that Nemours has assembled a high-quality, experienced, and unquestionably capable team of physicians and advanced practitioners for its cardiothoracic transplantation programs and is capable of performing the services proposed in its applications at a high level. UF Health Shands While not a party to this proceeding,2/ UF Health Shands’ (Shands) presence at the final hearing was pervasive. AHCA called numerous witnesses affiliated with Shands in its case-in-chief. The scope of the testimony presented by Shands- affiliated witnesses was circumscribed by Order dated December 13, 2017 (ruling on NCH’s motion in limine) that: At hearing, the Agency may present evidence that the needs of patients within OTSA 3 are being adequately served by providers located outside of OTSA 3, but may not present evidence regarding adverse impact on providers located outside of OTSA 3. Baycare of Se. Pasco, Inc. v. Ag. for Health Care Admin., Case No. 07-3482CON (Fla. DOAH Oct. 28, 2008; Fla. AHCA Jan. 7, 2009). UF Health Shands Hospital is located in Gainesville, Florida. UF Health Shands Children’s Hospital is an embedded hospital within a larger hospital complex. Shands Children’s Hospital has 200 beds and is held out to the public as a children’s hospital. The children’s hospital has 72 Level II and III NICU beds. Unlike Nemours, Shands offers obstetrical services such that babies are delivered at Shands. It also has a dedicated pediatric intensive care unit (PICU) as well as a dedicated pediatric cardiac intensive care unit. The Shands Children’s Hospital has its own separate emergency room and occupies four floors of the building in which it is located. It is separated from the adult services. Shands Children’s Hospital is nationally recognized by U.S. News & World Report as one of the nation’s best children’s hospitals. The children’s hospital has its own leadership, including Dr. Shelley Collins, an associate professor of pediatrics and the associate chief medical officer. As a comprehensive teaching and research institution, Shands Children’s Hospital has virtually every pediatric subspecialty that exists and is also a pediatric trauma center. The children’s hospital typically has 45 to 50 physician residents and 25 to 30 fellows along with medical students. Over $139 million has been awarded to Shands for research activities. As a teaching hospital, Shands is accustomed to caring for the needs of patients and families that come from other parts of the state or beyond. Jean Osbrach, a social work manager at Shands, testified for AHCA. Ms. Osbrach oversees the transplant social workers that provide services to the families with patients at Shands Children’s Hospital. Ms. Osbrach described how the transplant social workers interact with the families facing transplant from the outset of their connection with Shands. They help the families adjust to the child’s illness and deal with the crisis; they provide concrete services; and these social workers help the families by serving as navigators through the system. These social workers are part of the multidisciplinary team of care, and they stay involved with these families for years. Shands is adept at helping families with the issues associated with getting care away from their home cities. Shands has apartments specifically available in close proximity to the children’s hospital and relationships with organizations that can help families that need some financial support for items such as lodging, transportation, and gas. Ms. Osbrach’s ability to empathize with these families is further enhanced because her own daughter was seriously ill when she was younger. Ms. Osbrach testified that, while she was living in Gainesville, she searched out the best options for her child and decided that it was actually in Orlando. Despite the travel distance, she did not hesitate to make those trips in order to get the care her child needed at that time. The Shands Children’s Hospital is affiliated with the Children’s Hospital Association, the Children’s Miracle Network, the March of Dimes, and the Ronald McDonald House Charities. Shands operates ShandsCair, a comprehensive emergency transport system. ShandsCair operates nine ground ambulances of different sizes, five helicopters, and one fixed-wing jet aircraft. ShandsCair does over 7,000 transports a year, including a range of NICU and other pediatric transports. ShandsCair is one of the few services in the country that owns an EC-155 helicopter, which is the largest helicopter used as an air ambulance. This makes it easier to transport patients that require a lot of equipment, including those on extracorporeal membrane oxygenation (ECMO). Patients on ECMO can be safely transported by ground and by air by ShandsCair. Shandscair serves as a first responder and also provides facility-to- facility transport. It has been a leader in innovation. The congenital heart program at Shands includes two pediatric heart surgeons, as well as pediatric cardiologists Dr. Jay Fricker and Dr. Bill Pietra, both of whom testified for AHCA. Dr. Fricker did much of his early work and training at the Children’s Hospital of Pittsburgh, and came to the University of Florida in 1995. He is a professor and chief of the Division of Cardiology in the Department of Pediatrics at Shands. He is also the Gerold L. Schiebler Eminent Scholar Chair in Pediatric Cardiology at UF. He has been involved in the care of pediatric heart transplant patients his entire career. Dr. Bill Pietra received his medical training in Cincinnati and did his early work at several children’s hospitals in Colorado. He came to the University of Florida and Shands in July 2014 and is now the medical director, UF Health Congenital Heart Center. Shands performed its first pediatric heart transplant in 1986. Shands treats the full range of patients with heart disease and performs heart transplants on patients, from infants through adults, with complex congenital heart disease. Shands provides transplants to pediatric patients with both congenital heart defects and acquired heart disease (cardiomyopathy). Shands will accept the most difficult cases, including those that other institutions will not take. Data presented by AHCA dating back to the beginning of 2014 demonstrate that Shands has successfully transplanted numerous patients that were less than six months old at the time of transplantation. This data also demonstrates that Shands serves all of central and north Florida, as well as patients that choose to come to Shands from other states. PHT patients now survive much longer than in the past, and in many cases, well into adulthood. Because Shands cares for both adult and pediatric patients, it has the ability to continue to care for PHT patients as they transition from childhood to adulthood. Managed care companies are now a significant driver of where patients go for transplantation services. Many managed- care companies identify “centers of excellence” as their preferred providers for services such as PHT. Shands is recognized by the three major managed-care companies that identify transplant programs as a center of excellence for PHT services. AHCA’s Preliminary Decision Following AHCA’s review of Nemours’s applications, as well as consideration of comments made at the public hearing held on January 10, 2017, and written statements in support of and in opposition to the proposals, AHCA determined to preliminarily deny the PHT and PHLT applications, and to approve the PLT application. AHCA’s decision was memorialized in three separate SAARs, all dated February 17, 2017. Marisol Fitch, supervisor of AHCA’s CON and commercial-managed care unit, testified for AHCA. Ms. Fitch testified that AHCA does not publish a numeric need for transplant programs, as it does for other categories of services and facilities. Rather, the onus is on the applicant to demonstrate need for the program based on whatever methodology they choose to present to AHCA. In addition to the applicant’s need methodology, AHCA also looks at availability and accessibility of service in the area to determine whether there is an access problem. Finally, an applicant may attempt to demonstrate that “not normal” circumstances exist in its proposed service area sufficient to justify approval. Statutory Review Criteria Section 408.035(1) establishes the statutory review criteria applicable to CON Applications 10471 and 10472. The parties have stipulated that each CON application satisfies the criteria found in section 408.035(1), (d), (f), and (h), Florida Statutes. The only criteria at issue essentially relate to need and access. However, the Agency maintains that section 408.035(1)(c) is in dispute to the extent that center transplant volume as a result of Nemours’ approval would lead to or correlate with negative patient outcomes. AHCA believes that there is no need for the PHT or PHLT programs that Nemours seeks to develop because the needs of the children in the Nemours service area are being met by other providers in the state, principally Shands and Johns Hopkins All Children’s Hospital. Section 408.035(1)(a) and (b): The need for the health care facilities and health services being proposed; and the availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the district of the applicant. Florida Administrative Code Rule 59C-1.044(6)(b).3/ The criteria for the evaluation of CON applications, including applications for organ transplantation programs, are set forth at section 408.035 and rule 59C-1.044. However, neither the applicable statutes nor rules have a numeric need methodology that predicts future need for PHT or PHLT programs. Thus, it is up to the applicant to demonstrate need in accordance with rule 59C-1.044. There are four OTSAs in Florida, numbered OTSA 1 through OTSA 4. NCH is located in OSTA 3, which includes the following counties: Seminole, Orange, Osceola, Brevard, Indian River, Okeechobee, St. Lucie, Martin, Lake, and Volusia. (See § 408.032(5), Fla. Stat; Fla. Admin. Code R. 59C- 01.044(2)(f)3.) OTSA 3 also generally corresponds with the pediatric cardiac catheterization and open-heart surgery service areas defined by AHCA rule. (See Fla. Admin. Code R. 59C- 1.032(2)(g) and 59C-1.033(2)(h)). Currently, there is no provider of PHT in OTSA 3, but there are three providers of pediatric cardiac catheterization and pediatric open-heart surgery: Orlando Health Arnold Palmer Hospital for Children; Florida Hospital for Children; and Nemours. There are no licensed providers of PHLT anywhere in the State of Florida. There are four existing providers and one approved provider of PHT services in Florida: UF Shands in OTSA 1; Johns Hopkins All Children’s Hospital in OTSA 2; Jackson Memorial Hospital in OSTA 4; and Memorial Regional Hospital, d/b/a Joe DiMaggio’s Hospital in OTSA 4; and a third approved program in OTSA 4, Nicklaus Children’s Hospital, which received final approval from AHCA in August 2017. As noted above, there is no fixed-need pool published for PHT, PHLT, or PLT programs. Alternatively, AHCA follows rule 59C-1.008(2)(e)2., which requires consideration of population demographics and dynamics; availability, utilization and quality of like services in the district, subdistrict, or both; medical treatment trends; and market conditions. To quantify the need for a new PHT program in District 7, OTSA 3, Nemours created and presented a methodology that started with the statewide use rate in its projected first year. Then for the second year, Nemours aggressively increased the use rate to the highest rate in any of the other transplant service areas in the state. Then, in an even more aggressive (and unreasonable) assumption, Nemours projected that it would essentially capture all of the cases in OTSA 3 by the second year of the program. In its application, the assumptions resulted in a projection that Nemours would do four transplants in the first year of operation and eight in the second. These projections fall short of the rule requirement that the applicant project a minimum of 12 transplants per year by the second year of operation. Fla. Admin. Code R. 59C-1.044(6)(b)2. At hearing, Nemours updated (increased) those first and second year projections to 7 and 13 cases, respectively. However, these updated projections included one child, aged 15 to 17, in year one, and two in year two. There are several reasons these projections lack credibility. First, as noted, Nemours assumed a near- 100 percent market share based on the highest use rate in the state by just year two. Second, when Nemours prepared its update, it used the most recent calendar year data. However, this was not the most current data. Calendar Year 2016 reflected 34 cases statewide, but that number had dropped to 21 for the most recent 12-month period available at the time of the hearing. Use of this most recent 12-month data would have significantly decreased the Nemours PHT volume projections. In addition, the projection of 13 cases by year two would place Nemours at a higher PHT case volume than three of the four established programs in the state, and would be at a level that is nearly equivalent to the much more established Shands program. This is not credible, especially considering that Nemours also admitted at hearing that only two OTSA 3 residents received pediatric heart transplants in 2016. The existence of unmet need cannot be based solely on the absence of an existing service in the proposed service area. Fla. Admin. Code R. 59C-1.008(2)(e)3. While Nemours’ own health planner agreed that the absence of a PHT program in OTSA 3 is not itself a basis for finding need, Nemours nevertheless argues that this rule is inapplicable in this proceeding because the title to this subsection of the rule is “Comparative Review” and a portion of this subsection addresses competing applications in the same cycle. As detailed further in the Conclusions of Law section herein, this interpretation is unconvincing and rejected. AHCA interprets this rule provision to apply to those batched applications submitted without the submission of a competing application in the same batching cycle, as with Nemours in this proceeding. Nemours initiated its cardiac catheterization and cardiac surgery program in June/July 2016. In its PHT application, Nemours projected that it would meet or exceed the rule minimum required volumes of 200 cardiac catheterizations and 125 open-heart surgery cases by the end of 2017. Actual volumes achieved by Nemours in CY 2017 were 97 open-heart cases and 196 cardiac catheterizations. The incidence of PHLT is extremely low. During the four calendar years, 2013 through 2016, there were only 16 PHLT transplants performed nationwide. Only one Florida resident received a PHLT during that four-year period, and that was performed in Massachusetts. Also during that four-year period, only three Florida residents were registered for PHLT. There is no evidence in this record as to why two of the three registered Florida residents did not obtain a PHLT. Based on the national use rate for PHLTs from CY 2013 through CY 2016, Nemours projects that it will perform an average of one PHLT per year. Nemours acknowledges that due to the extremely low incidence of PHLTs, there may be some years that no PHLTs are performed at Nemours. Geographic Access There is no evidence of record that families living in central Florida are currently being forced to travel unreasonable distances to obtain PHT services. Indeed, there are five existing or approved programs within the state, with at least two located very reasonably proximate to OTSA 3. According to the analysis of travel distances for PHT patients living in OTSA 3 contained in the Nemours application (Exhibit 15), only some residents located in Brevard and Indian River Counties are not within 120 miles of an existing PHT program. There was agreement that patients that need a PHT are approaching the end-stage of cardiac function, and in the absence of a PHT will very likely die. Accordingly, it is reasonable to infer that the parents of a child living in central Florida and needing a PHT will travel to St. Petersburg or Gainesville for transplant services rather than let their child die because the travel distance is too far. To the contrary, the evidence in this record from witnesses on both sides, as well as common sense, is that families will go as far as necessary to save their child. The notion that there is some pent-up demand for PHT services among central Florida residents (especially when there is no evidence of a single OTSA 3 patient being turned down or unable to access a PHT) is without support in this record. The parents of four pediatric patients testified at the final hearing. Two testified for Nemours. The other two testified for AHCA and were parents of children that received PHTs at Shands. One of the Nemours witnesses was the parent of a child that has not received a transplant. The other received transplant services at Johns Hopkins All Children’s Hospital in St. Petersburg. The parents of the two Shands patients were representative of the two broad categories of PHT patients. One was a patient with a congenital heart defect that lives in Cocoa Beach (Brevard County). The patient likely had the heart defect since birth, but it was not diagnosed until she was six years old. That patient was asymptomatic at the time of diagnosis but deteriorated over a period of years. While she was first seen at Shands, the family had the time and researched other prominent institutions, including Texas Children’s Hospital, Boston Children’s Hospital, Children’s Hospital of Pittsburgh, and the Mayo Clinic in Rochester, Minnesota. They did this because, like all of the parents that testified, they “would have gone to the ends of the earth” to save their child. This family researched the volumes and experience of the programs they considered and looked for what they felt was the best program for their child, and ultimately chose Shands. It was clear that they felt Shands was the right choice. Their daughter received her heart transplant at Shands, is doing well, and is now considering what college to attend. Additionally, this family did not find the two hours and 35 minute travel time from their home in Brevard County to Shands to be an impediment, and actually consider Shands as being relatively close to their home. This testimony supports the obvious truism that obtaining the best possible outcome for a sick child is the paramount goal of any parent. The other parent witness called by AHCA has a daughter that, on Christmas Eve in 2008, went from perfectly healthy to near death and being placed on life support within a 24-hour period. As opposed to a congenital heart defect, this patient had cardiomyopathy. This family lives in Windermere, a suburb of Orlando. She acquired a virus that attacked her heart. She was initially treated at Arnold Palmer Children’s Hospital where she had to be placed on ECMO. From there, she was safely airlifted to Shands while still on ECMO where, upon arrival, the receiving team of physicians informed the family that she was one of the most critically ill children they had ever seen. After an 11-hour open-heart surgery, a Berlin Heart was successfully implanted and kept her alive for four months until an appropriate donor heart became available. This patient also had an excellent outcome and is now a student at the University of Florida. The following exchange summarizes how the child’s mother felt about the inconvenience of having to travel from the Orlando area to Gainesville: Q If a family in Orlando told you, or in your city of residence told you that their child was critically ill and they were worried about having to travel and potentially spend time in Gainesville to get care, what would you tell them? A Well, I would tell them to just take it a day at a time and – when your child is critically ill, convenience never really comes into your mind. What comes into your mind is how do I help my child live. And so you will go anywhere. And it’s just an hour and a half, it just doesn’t matter. When you are talking about saving your child, it means nothing. It literally means nothing. It is clear from the testimony of these two parents that nothing about having a gravely ill child is “convenient.” It creates great stress, but it was also clear that having an experienced provider was more important than just geographic proximity. The mothers of the two Shands patients persuasively spoke of their concerns about further diluting the volumes of the existing programs that could result from approval of a sixth pediatric heart transplant program in Florida, particularly when there are two other programs that are not that far from the Orlando area.4/ While transplantation is not an elective service, it is not done on an emergent basis. As noted, the number of families affected is, quite fortunately, very small. While having a child with these issues is never “convenient,” the travel issues that might exist do not outweigh the weight of the evidence that fails to demonstrate a need for approval of either application. The Orlando area, being centrally located in Florida, is reasonably accessible to all of the existing providers. Most appear to go to Shands, which is simply not a substantial distance away. The credible evidence is that families facing these issues are able to deal with the travel inconvenience. In addition, Nemours presented evidence regarding the various locations at which they provide services, ranging from Pensacola to Port St. Lucie. Clearly, Nemours sees itself as providing some cardiac services to patients in these locations, but it would also suggest that patients seen at these locations may be referred to NCH for transplant services, which would mean that some patients would be bypassing closer facilities. As observed by AHCA, for Nemours to posit that it is appropriate for patients to travel from Pensacola or Jacksonville to Orlando while asserting that it is not acceptable for patients in Orlando to go to Gainesville or St. Petersburg is an illogical inconsistency. Financial Access Nemours asserts that approval of its proposed programs will enhance financial access to care. Nemours currently serves patients without regard to ability to pay and will extend these same policies to transplant recipients. Approximately half of Nemours’ projected PHTs are to be provided to Medicaid recipients, the other half to commercially insured patients.5/ However, there was no competent evidence of record that access to PHT or PHLT services was being denied by any of the existing transplant providers because of a patient’s inability to pay. Transplant Rates at Shands In its need methodology, Nemours utilized the use rate from OTSA 1 where Shands is located because it is the highest use rate in the state. Despite this, Nemours then asserted that Shands is not performing as many PHTs as it could or should. The Nemours CON applications are not predicated on any argument that their proposed programs are needed because of poor quality care at any of the existing pediatric transplant programs in Florida. Indeed, Dr. Wearden stated his belief that Shands provides good quality care in its transplant programs, and he respects the Shands lead surgeon, Dr. Mark Bleiweis. As evidence of his respect for the Shands PHT program, Dr. Wearden has referred several transplant patients to Dr. Bleiweis at Shands. Despite that position, Nemours argued that the Shands program is unduly conservative and cautious in its organ selection and may have some “capacity” issues due to a few cited instances of apparent surgeon unavailability. These assertions, made by Nemours witnesses with no first-hand knowledge of the operations of the Shands program, are not persuasive. With regard to whether the Shands program is unduly “cautious,” “conservative,” or “picky,” Nemours relied on a document produced by Shands in discovery. Nemours also relied on data reported by Shands to the Scientific Registry of Transplant Recipients (SRTR). The data included a list of all of the organs offered to Shands since the beginning of 2015, the sequencing of the offer of that organ to Shands, whether the organ was transplanted at Shands or elsewhere, the primary and secondary reasons the organ was refused (if refused) and other information. The SRTR exhibit demonstrates that a high number of the organs that are offered are not acceptable for transplant on patients waitlisted at Shands. It also shows that organs that are accepted may have to be examined by many different centers before being deemed potentially acceptable. This demonstrates the extensive level of complexity, nuance, and clinical judgment involved in the decision to accept an organ for transplant in a pediatric patient. Indeed, Dr. Wearden agreed that the decision by a program to accept or turn down an organ involves both clinical expertise and judgment, and that there are many reasons an organ might be turned down, which helps explain why the transplanted percentage of total organs offered nationally is on average, so small. Dr. Wearden chose a few examples of organs that were not taken by Shands to express an opinion that Shands may be unduly conservative in its organ selection. However, this assertion was credibly refuted by Dr. Pietra, a transplant cardiologist and the medical director of the UF Health Congenital Heart Center. Dr. Pietra discussed the complexity of these cases and how simply looking at the SRTR data does not provide enough information to reach Dr. Wearden’s conclusion. An organ that might be acceptable for one patient would not be acceptable for another for a host of reasons. Many more organs are rejected by transplant centers than are accepted. Dr. Pietra credibly opined that being conservative and cautious are important traits for a transplant surgeon, particularly for one that wants the accepted organ to work well for the patient long-term. That does not mean that Shands is rejecting organs when it should have taken them, nor does the SRTR data support the proposition that the Nemours program should be approved because its program may have accepted an organ for a particular patient that Shands might have rejected. Nemours also argues that Shands performs PHTs at a rate lower than the region and the country, and that this should mitigate for the approval of another program. This assertion is predicated on waitlist information reported in the SRTR data. Patients that are placed on the waitlist have different status designations, depending on the severity of their condition. That status may change, up or down, over time. Due to the shortage of organs, until a patient reaches status 1A, he or she is unlikely to be offered an organ. The evidence reflected that Shands puts patients on the PHT organ waitlist at a time earlier than the moment they require the transplant surgery under what is called the “pediatric prerogative.” This helps those patients maintain their status on the list but does not result in organs being provided to less severely ill patients to the detriment of those in greater need. Further, the record evidence supports the finding that Shands waitlists patients because the clinical determination has been made that the child will ultimately require a transplant. This was corroborated by the parent of a Shands PHT patient who testified that when her daughter was placed on the waitlist, Dr. Fricker concluded at that time that her daughter would ultimately need a PHT, even though she was placed on a lower status initially, and it was a few years before the transplant occurred. Transplant surgeon Dr. Victor Morell, of the Children’s Hospital of Pittsburgh, testified that he waitlists his PHT patients not only when they need the procedure performed immediately, but rather when, in his clinical judgment, he determines the patient will ultimately need a PHT. This testimony supports the finding that there is nothing clinically unusual or inappropriate about how the Shands program waitlists patients. Shands realizes that its philosophy, which is contemplated within and permitted under the United Network for Organ Sharing (UNOS) rules, makes its statistics, both in terms of percent of patients transplanted and waitlist mortality, look worse. While Shands’ waitlist mortality may be higher than expected as reflected in the SRTR data, it is still significantly lower than in the UNOS region or the United States. Shands advocates for its patients by their waitlist practices because it believes it helps secure the best outcomes for its patients. It does not indicate need for a new PHT program. Nemours also suggests that there may be a “capacity” problem at Shands because the organ rejection information provided by Shands shows that, during the 3-year period of CY 2015 through CY 2017, there were seven entries showing as either a primary or secondary reason for organ rejection that the surgeon was unavailable. However, this included both adult and pediatric hearts, and further investigation revealed that in only four instances were there potential PHT recipients at Shands. Of those four hearts that were rejected, two were not accepted by any PHT provider, and the two that were accepted were placed with adult transplant patients, not PHT patients. Shands has two PHT transplant surgeons. In very few instances at Shands, an organ was offered but not accepted because the surgeon was not available for one of several reasons. In one instance, there was another transplant scheduled. A surgeon could be ill, could be gone, or may have just completed another long surgery and be too fatigued to safely perform another. Like Shands, Nemours also has two experienced PHT surgeons. Although Dr. Wearden believes that Nemours would endeavor to not reject an organ for this reason, this ambition ignores reality. He cannot guarantee that the same could not or would not happen at Nemours for the same reasons it occasionally occurs at Shands. As explained by Dr. Pietra, when there are only small to medium volume programs, there is not likely to be a sufficient number of surgeons such that this scenario can be avoided entirely. Not Normal Circumstances In both its heart and heart/lung applications, Nemours articulated the following “not normal circumstances” in seeking approval: Florida does not have any approved pediatric heart/lung transplant programs. Florida's only two approved pediatric lung transplant programs have not performed any lung transplant programs in the last two reporting years according to AHCA reporting data. Significantly, there are no pediatric heart transplant or lung transplant programs in AHCA's Organ Transplant Service Area OTSA 3 in which NCH is located-an area of the State with one the fastest growing and youngest populations. Florida has no other pediatric comprehensive, multi-organ thoracic transplant program. Florida has no other pediatric comprehensive, multi-organ thoracic transplant program that is part of a pediatric specific integrated delivery system such as Nemours offers. NCH offers a unique, dedicated model of cardiothoracic care developed at its Alfred I. duPont Hospital for Children (AIDHC) in Wilmington, Delaware and implemented upon the opening of the program at NCH. The key and differentiating element of this Model of Care is a unified team of cardiac clinical and administrative professionals who serve children with cardiac problems in dedicated facilities (the "Cardiac Team"). The Cardiac Team only cares for children with cardiac diagnoses. As such, the Cardiac Team of anesthesiologists, surgeons, cardiologists, nurses, and other support personnel do not "float" to other hospital floors or departments as in a typical hospital setting. This dedicated model of cardiac care allows the Cardiac Team to develop highly specialized knowledge and relationships to provide the best treatment protocols for patients with cardiac conditions. NCH has developed state-of-the art facilities and innovative clinical pathways for the care of the most complex pediatric thoracic patients. NCH has and will bring new opportunities for research in pediatric cardiology, cardiac surgery, and pulmonary medicine, particularly clinical translational and basic research into the linkages between childhood obesity and cardiac conditions. Nemours operates a regional network of clinics in Florida, with primary locations in Pensacola, Jacksonville, and Orlando, that will operate in partnership with NCH for the appropriate regional referral of patients in Florida for pediatric thoracic care. NCH can reduce the out-migration of pediatric, thoracic transplant patients from OTSA 3 to other parts of the State as well as the out-migration of these patients to other out-of-state transplant programs. Similarly, NCH will reduce the outmigration of organs donated in Florida to other states ensuring that Florida recipient patients are first priority for organs donated in Florida. NCH has in place the infrastructure, facilities, and resources to seamlessly add thoracic transplant services to its existing comprehensive cardiac surgery program. Additional needed staff are already being recruited to this program. As a result, the project has minimal incremental cost that will need to be incurred. Total project costs are, therefore, estimated to be $715,425.00. In addition, according to Nemours, an additional “not normal” circumstance has emerged since the filing of the applications: the approval of Nemours’ PLT application in the absence of a PHT program at the facility, which it contends is “a very unusual situation.” Noteworthy about these purported reasons for approval are that: (1) none of them are specifically directed at a unique circumstance relating to a need for another PHT program; and (2) most of them are either a recitation of the fact that there is no existing program in the service area or are about Nemours’ capability to provide these services. They are not directed at whether there is a need for its proposed programs. In fact, the main thrust of Nemours’ case was directed at proof regarding its capabilities. But the flaw in this theme is best demonstrated in the testimony of Dawn Tucker, the last witness called by Nemours. Ms. Tucker is the cardiac program administrative director for Nemours. When asked why she supported the proposed program, she talked about the experience of the team, a desire to care for sick patients, an organization (Nemours) that financially supports the program, and the network of centers that Nemours has in Florida. These factors address why Nemours “wants” these CONs. None of them addresses the threshold issue of whether there is a “need” for these programs in OTSA 3. More specifically, the first, third, and fourth bullet points are all based on the absence of a program in OTSA 3. By rule, that is not a basis for establishing need. Fla. Admin. Code R. 59C-1.009(2)(e)3. AHCA appropriately rejected the absence of a program in OTSA 3 as the sole basis upon which need for the proposed projects could be established. The second bullet point relates to the pediatric lung transplant application that is not at issue in this matter. The fifth and sixth bullet points relate to the Nemours integrated model of care. But again, this does not address whether there is a need for the proposed programs. The fact that Nemours has an employed-physician model is not unique or “not normal.” AHCA considered the information regarding the model of care and correctly noted that the model of care does not itself enhance access or improve outcomes. It should be noted that Shands’ doctors are employed by the University of Florida. In addition, the reliance on this model does not guarantee a robust program. This bullet point references the much older and more established Alfred I. duPont Hospital for Children in Wilmington, Delaware, that is touted as the model for Nemours. Nemours presented evidence relating to its more established hospital in Delaware that also provides PHT services. However, the PHT program at duPont is a low-volume program, performing only one PHT in 2016. None of the managed- care companies that recognize Shands as a center of excellence also recognizes the duPont Hospital as such. One of the companies--Lifetrac--acknowledges duPont as a “supplemental” program, whereas Shands is one of its “select” programs. This demonstrates that simply having the financial resources of the duPont Foundation or the model of care used by that organization does not guarantee high volumes or success. The “not normal circumstance” bullet points regarding Nemours’ facilities, research, and other infrastructure similarly do not demonstrate need. Otherwise, a hospital could obtain a CON for a new program by spending the money in advance and then demanding approval based upon those expenditures. AHCA recognized that Nemours had recruited some very qualified clinicians, but correctly noted that that does not create or evidence need for the proposed programs. The remaining bullet point asserts that approval of the PHT and PHLT programs could reduce outmigration of both patients and organs. By definition, because neither of these transplant programs exists in OTSA 3, all patients leave OTSA 3 for these services. Again, that alone does not establish need, nor is it automatically a “not normal” circumstance. As discussed herein, Nemours has not demonstrated a sufficient need or an access problem that justifies approval of either application. With regard to the outmigration of organs from Florida, Nemours has argued that Florida is a net exporter of organs and that this is a “not normal” circumstance justifying approval of its application. However, organs harvested in one state are commonly used in another. There is nothing unusual or negative about that fact. Indeed, Dr. Wearden agreed that in his experience, this is a common occurrence. There is a national allocation system through UNOS and this sharing, as explained by Dr. Pietra, facilitates the best match for organs and patients. UNOS divides the country into regions for the purpose of allocation of donor organs, with Florida being one of six states in Region 3. The evidence of record did not establish that approval of the Nemours applications would result in the reduction of organs leaving Florida, or even that such would be a desirable result. Nemours also argued at hearing that approving their applications would increase the number of donor organs that are procured and transplanted in Florida. Nemours suggested that its programs would increase public awareness and implied that it would accept organs for future patients that surgeons at other programs turn down. However, these arguments are purely conjectural and are rejected. No record evidence exists which demonstrates that a Nemours program would increase the supply of organs in Florida. Indeed, Nemours presented no such relevant data or statistical evidence in its applications to demonstrate that this will occur. Finally, Nemours argues that its PHT and PHLT applications should be approved because it does not make sense for AHCA to have approved the PLT program but denied the other two applications. Nemours goes on to note that while there are hospitals in the country that do PHTs but not PLTs, there are no hospitals that do lungs but not hearts. Regardless of whether that is true, Florida law separates these three services into separate CON applications, which are reviewed independently. The wisdom of the rule is not at issue in this proceeding. Regardless of any overlap in the skill sets required to perform these procedures, approval of the pediatric lung transplant application does not determine need for pediatric heart or pediatric heart/lung programs. Nemours failed to establish that “not normal” circumstances currently exist that would warrant approval of either the PHT or PHLT programs. Nor did Nemours credibly demonstrate any other indicators of need for its proposed programs. Section 408.035(1)(c): The ability of the applicant to provide quality of care and the applicant’s record of providing quality of care. The parties stipulated that Nemours is a quality provider. However, AHCA maintains that this criterion is in dispute to the extent that center transplant volume as a result of Nemours’ approval would lead to or correlate with negative patient outcomes. Nemours failed to demonstrate that it would achieve the volumes it projected unless it takes significant volumes from other Florida providers.6/ Approval of Nemours will not create transplant patients that do not exist or are not currently able to reasonably access services. While Nemours has assembled a team of professionals with varying levels of transplant experience, it has not been demonstrated that it will achieve volume sufficient to reasonably assure quality care.7/ Section 408.035(1)(e): The extent to which the proposed services will enhance access to health care for residents of the service district. Approval of the Nemours PHT and PHLT programs would unquestionably improve geographic access to those services for the very few residents of OTSA 3 that need them. However, given the extreme rarity of pediatric heart and heart/lung transplants, approval of the Nemours programs would not result in enhanced access for a significant number of patients. Moreover, there was no credible non-hearsay evidence presented at hearing that any resident of OTSA 3 that needed PHT or PHLT services was unable to access those services at one of the existing PHT programs in Florida or, for PHLT, at a facility elsewhere. Based upon persuasive evidence at hearing, there is also clearly a positive relationship between volume and outcomes. As with any complex endeavor, practice makes perfect. In this instance, maintaining a minimum PHT case volume provides experience to the clinicians involved and helps maintain proficiency. According to the credible testimony of Dr. Pietra, programs should perform no fewer than 10 PHTs per year. “If you can stay above 10, then your program is going to be exercised at a minimum amount to keep everybody sort of at a peak performance.” The clear intent of the minimum volume requirement of 12 heart transplants per year contained in rule 59C- 1.044(6)(b)2. is to ensure a sufficient case volume to maintain the proficiency of the transplant surgeons and other clinicians involved in the surgical and post-surgical care of PHT patients. In addition, pediatric transplant programs are measured statistically based on outcomes, such as mortality and morbidity. Because of this, the loss of even one patient in a small program can be devastating to that hospital’s mortality statistics. As such, small programs may become less willing to take more complicated patients. In a perverse sort of way, adding more programs that dilute volumes may decrease, rather than increase, access because of the fear a small program might have for taking more complex patients. Adequate case volume is also important for teaching facilities, such as Shands, to benefit residents of all the OTSAs by being able to train the next generation of transplant physicians. The mothers of the two Shands patients that testified made note of the complexity of their daughters’ conditions and how their cases were used for training purposes. There was no persuasive evidence of record that approval of the Nemours applications would meaningfully and significantly enhance geographic access to transplant services in OTSA 3. The modest improvement in geographic access for the few patients that are to be served by the two programs is not significant enough to justify approval in the absence of demonstrated need. There is no evidence that approval of the Nemours applications will enhance financial access nor that patients are not currently able to access PHT or PHLT services because of payor status. Section 408.035(1)(g): The extent to which the proposal will foster competition that promotes quality and cost- effectiveness. It is clear that establishing and maintaining a transplant program is expensive. Given the limited pool of patients, the added expense of yet a sixth Florida program is not a cost-effective use of resources. This criterion also relates to the Nemours position that AHCA should approve the PHT and PHLT applications simply because the PLT application was approved, and it would not be cost-effective for Nemours unless the PHT and PHLT applications were also approved. However, each of these applications must rise or fall on its own merit. As of the hearing, Nemours had not yet implemented its PLT program. Given the absence of need for either the PHT or PHLT programs, the cost-effective solution might be for Nemours to reconsider implementation of the PLT program. 408.035(1)(i): The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent. AHCA agreed at hearing that Nemours satisfies section 408.035(1)(i). Nonetheless, Nemours provides a very high level of Medicaid services, and projects a high-level volume related to Medicaid patients and charity care patients. As noted, approximately half of the PHTs projected by Nemours will be performed on Medicaid patients. Conformance with this criterion would mitigate toward approval had there been persuasive evidence that Medicaid and medically indigent patients are currently being denied access to PHT and PHLT services. However, no such evidence was presented.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered denying CON Application Nos. 10471 and 10472 filed by The Nemours Foundation, d/b/a Nemours Children’s Hospital. DONE AND ENTERED this 31st day of July, 2018, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of July, 2018.
Findings Of Fact Lawnwood Regional Medical Center is a 225 bed community hospital in Ft. Pierce, Florida. It currently holds a CON to add an additional 50 beds. Lawnwood is owned and operated by Hospital Corporation of America, (HCA). On October 14, 1985, Lawnwood submitted a CON application for authorization to provide cardiac catheterization and open heart surgery programs at the facility. The project for both services would involve a total of approximately 10,000 sq. ft. of construction consisting of both new construction and renovation of the present facility, with a project cost of approximately $3.6 million. Lawnwood developed the project because it found a need therefor as a result of various visits to the administrator by physicians practicing in the area who indicated a growing demand for the services. The physicians in question indicated they were referring more and more patients to facilities out of the immediate area and the services in question were very much needed in this locality. The main service area for Lawnwood consists of the northern four counties of DHRS District IX, including St. Lucie, Martin, Okeechobee, and Indian River Counties. The majority of the cardiology practitioners in this service area find it necessary, because of the lack of cardiac catheterization and open heart surgery programs, to transfer patients to facilities either in Palm Beach County, which are from one to two hours away, or to facilities outside the District, primarily in Miami or the University of Florida area, which are even further. While many heart patients are not severely impacted by this, one specific class of patient, the streptokinase patient is. This procedure, involving the use of a chemical injected by catheter to dissolve a clot causing blockage must he done within a relatively short period of time after the onset of the blockage to be effective. However, this can he done outside a cardiac cath lab. A representative sampling of doctors testifying for Lawnwood indicated that during the year prior to the hearing, one doctor, Kahddus, sent 140 patients outside the district for catheterization procedures and 90 additional patients for open heart surgery. Other physicians referring outside District IX included Dr. Hayes - 4; Dr. Marjieh - 240; and Dr. Whittle - 12. Doctors indicated that the situation was so severe that some physicians practicing in the Palm Beach area, who have cardiac catheter and open heart surgery services available to them in the immediate locale are nonetheless referring patients outside the District for these procedures. No physician who does this testified, however. St. Mary's Hospital is a 358 bed not for profit hospital located in Palm Beach County. It has been issued a CON for a cardiac catheterization lab expected to come on line in April, 1987. Palm Beach Gardens Medical Center is a 204 bed acute care hospital which currently operates a cardiac catheterization laboratory and an open heart surgery program. It, too, is located in Palm Beach County. A second cardiac catheterization laboratory was scheduled to open at this facility in February, 1987. An additional cardiac catheterization laboratory is operating at Delray Community Hospital and this facility, as well as the currently existing facility at PBGMC are the only two currently operating cardiac catheterization laboratories within DHRS District IX. There are, however, other cardiac catheterization labs approved for District IX. These include the aforementioned second PBGMC lab, the aforementioned St. Mary's lab, one at JFK Hospital and one at Boca Raton Community Hospital. These latter four facilities are not yet operational. As to open heart surgery programs, only PBGMC and Delray Community Hospital have open heart surgery programs on line. JFK has been approved for an open heart surgery program. DHRS has promulgated rules for determining the need for cardiac catheterization and open heart surgery programs. These rules are found in Section 10-5.11(15) and (16), F.A.C. and establish methodologies based on use rates to determine need. The use rate for the applicable time period here, July, 1984 through June, 1985, is to be multiplied by the projected population for the District in the planning horizon, (July, 1987) which figure is then divided by 600 procedures per laboratory to determine the need for catheterization labs or 350 open heart procedures to determine the need for additional open heart surgery programs. The difficulty in applying this methodology to the current situation is in the calculation of the "use rate" used to measure the utilization of a service per unit of population. For the rule here, it is expressed as the number of procedures per 100,000 population. There is more than one way to calculate a use rate and the DHRS rules do not specify the method of calculation. An "actual use rate" is determined by applying the actual number of procedures performed within a particular geographical area in a particular time period. Data to determine an actual use rate for catheterization services or open heart surgery is not currently available in District IX, however. Applying the formula cited above to the existing figures, however, reflects a use rate of 62.3 procedures per 100,000 population in District IX. This is far below the 409.7 procedures per 100,000 population statewide. Lawnwood proposes to apply the statewide use rate rather than the District IX use rate because District IX is currently in a start up phase and does not have sufficient historical information available to provide an accurate use rate for the purpose of the need methodology. The lower the use rate, the lower the need will be shown to be. If the lower District IX rate is applied, in light of the numerous other laboratories coming on line approved already, there would clearly be no need for any additional services in either the catheterization or open heart surgery areas. Some experts offer as a potential substitute for the actual use rate a "facility based use rate" which involves determining the number of procedures performed in all hospitals within a particular geographic area for the applicable time period and dividing that number of procedures by the population of that area. DHRS evaluators employed this "facility based use rate" in their need calculations. At least one expert, however, contends that the "facility based use rate" is appropriate only when certain conditions exist. These include an adequate supply of facilities or providers in the area; historical, long-standing experience rather than start-up programs; and a lack of a high number of referrals outside of the particular area. Since these three conditions are not met here, it would seen that the "facility based use rate" would not be appropriate. In determining the statewide use rate of 409.07, Mr. Nelson, consultant testifying on behalf of Lawnwood, derived that figure by compiling utilization data for all hospitals in the state providing cardiac catheterization during the time period in question divided by the statewide population as of January 1, 1985. The resulting figure was thereafter converted into a rate per unit of population. A statewide figure such as this includes patients of all ages and it would appear that this is as it should be. Catheterization and open heart surgery services would be open to all segments of the state population and it would seem only right therefore that the entire population be considered when arriving at figures designed to assess the need for additional services. On the other hand, experts testifying on behalf of the intervenors utilized statistical manipulation which tended to indicated that the need, reflected as greater under Mr. Nelson's methodology, was in fact not accurate and was flawed. He that as it may, it is difficult to conclude which of the different experts testifying is accurate and the chances are great that none is 100 percent on track. More likely, and it is so found, the appropriate figure would be one more extensive than the population figures and resultant use rate for District IX alone and closer to the statewide rate across a broad spectrum of the population. When the fact that the older population of the District IX counties, the age cohort more likely to utilize catheterization and open heart surgery services, is greater in the District IX counties than perhaps in other counties north of that area, the inescapable conclusion must be reached that a use rate significantly higher than 62.3 would be appropriate. This may not, however, require the use of a statewide rate of 409.7. Utilizing, arguendo, the statewide use rate of approximately 409 procedures per 100,000 population results in a projected number of procedures of 4,576 in District IX if the projected population figure of slightly more than 1.1 million holds true. When that 4,576 figure is divided by the minimum number of procedures required by rule prior to the addition of further cardiac catheterization labs, (600),a need for 7.63 labs in District IX is shown. With six labs existing or approved, a net need of two additional labs would appear to exist since DHRS rounds upward when the number is .5 or higher. A similar analysis applied to open heart surgery, using a statewide use rate of 120.94 per 100,000 population results in a procedure number of 1,353 for the same population. Utilizing the DHRS rule minimum of 350 procedures per lab for open heart surgery procedures, a net yield of 3.87 programs would be needed in District IX in January, 1988. Subtracting the three existing or approved programs now in the district, and rounding up, would show a need of one additional open heart surgery program. These are the figures relied upon by Lawnwood. Accepting them for the moment and going to the issue of financial feasibility, DHRS apparently has agreed that the project costs for this facility are reasonable. Lawnwood has shown itself to be a profitable hospital and HCA is a large, well run corporation not known for the establishment of non- profitable operations. If one accepts that the actual utilization will approximate the projected utilization figures, then the operation would clearly be financially feasible. Both intervenors challenged the Petitioner's pro forma statement of earnings, but their efforts were not particularly successful. If Lawnwood can perform a sufficient number of procedures, then it should be able to break even without difficulty. Turning to the question of the impact that the opening of Lawnwood's facilities would have on the other providers or prospective providers in the area, both PBGMC and St. Mary's contend that there would be a substantial adverse impact on their existing services as well as on the prospective units already approved. Lawnwood proposes to service a portion of the indigent population with its two new operations. Were this to be done, indeed an impact would be felt by St. Mary's which is currently a substantial provider of indigent and Medicaid treatment and St. Mary's will be particularly vulnerable since it is in the start-up phase of its cardiac catheterization lab. Currently, PBGMC draws patients in both services from Martin and St. Lucie counties as well as from Palm Beach County. The percentage of patients drawn from these more northern counties is, while not overwhelming, at least significant, being 14 percent from Martin County and 9 percent from St. Lucie. Taken together, this constitutes 23 percent of the activity in these areas. St. Mary's anticipates a loss of 25 percent of its potential catheterization cases and if this happens, it will lose approximately $719,000.00 of its gross revenue in catheterization cases alone. St. Mary's further predicts that if Lawnwood's facility is opened, it will have difficulty recruiting and maintaining qualified personnel. PBGMC, figuring it's loss to be approximately $492,000.00, estimates that a layoff of nursing and other staff personnel or the redirecting them into other areas of the hospital would be indicated. PBGMC also refers to the cumulative impact not only of Lawnwood's proposal but of the other cardiac programs in the District which have been approved but are not yet on line. If all come into operation, PBGMC estimates it could lose as much as 69 percent of its activity in these areas. These negative predictions are not, however, supported by any firm evidence and are prospective in nature. From a historic perspective, it is doubtful that any lasting significant negative impact would occur to either PBGMC or St. Mary's overall operation by the opening of Lawnwood's facility. Turning to the question of staffing and its relationship to the issue of quality of care, there is little doubt that Lawnwood could obtain appropriate staffing for both its services if approved. Of the physicians already on staff at the facility, many are now certified and the hospital and the medical community plans training programs for those who are not. As to nurses and other support personnel, Lawnwood is satisfied that it can recruit from other HCA facilities and will recruit from the open market. It has a full time recruiter on staff. Quality of care is of paramount concern to the administration of Lawnwood. It has a current three year accreditation from the Joint Commission on Hospital Accreditation. It also has a quality control committee made up of both physicians and other staff members and the laboratory is approved by appropriate accrediting agencies. These same types of quality control programs would be applied to both new requested services as well. The rules in question governing the approval of cardiac catheterization laboratories and open heart surgery programs set down certain criteria for the approval of additional services which, as to the question of cardiac catheters states at subparagraph 15(o)1a that there will be no additional adult cardiac catheterization laboratories established in a service area unless the average number of catheterizations performed per year by existing and approved laboratories performing adult procedures in the service area is greater than 600. Much the same qualification relates to open heart surgery programs except that in that latter case, the minimum number would be 350 open heart procedures annually for adults and 130 for pediatric heart procedures annually. Ms. Farr, consultant for DHRS, feels that Petitioner's application would be inconsistent with the minimum standards set forth in the rule because she does not believe the Petitioner would do enough procedures in either cardiac catheterization or open heart surgery to meet the 600/350 criteria. She also contends that the proposal is not consistent with the District Health Plan, because the District plan requires the rule which addresses need be followed. Since, in her opinion, the application of the rule shows no need, there would be a violation of the District Health Plan if these proposals were approved. In the area of cardiac catheterization laboratories, of the six licensed and approved labs in District IX, only that existing currently at PBGMC is presently performing more than 600 procedures per year. Substantial testimony tending to indicate that a well organized cardiac catheterization lab can handle between 1500 and 2000 procedures per year, the 600 figure would tend to be a minimum and was so recognized by the drafters of the rule. No evidence was introduced by any party to show the numbers of open heart surgery procedures currently being performed in the three existing or approved open heart surgery programs in the District. Again, however, it would appear that DHRS criteria of 350 would be a minimum rather than an optimum or maximum figure. The parties have stipulated that as to the travel time criteria set forth in the rule for both procedures, 90 percent of the population of District IX is within two hour automobile travel time from availability to either or both procedures. It would further appear from an evaluation of the evidence, that while difficulty is experienced in arranging treatment for indigent transfer patients outside the District, little if any difficulty is experienced in arranging transfer treatment for those who can pay for the service. Little difficulty is experienced in securing treatment for these individuals in either Miami, Orlando, or elsewhere, and aside from inconvenience, there was no showing that a real, substantial health risk existed as a result of the transfer process. All things taken together, then, though the numerical evaluation under the rule process, applying a statewide use rate, tends to indicate that there is a "need" for this additional service, the subparagraph "o" criteria of 600/350 procedures requirement prior to authorization of additional service is not met.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that Lawnwood's application for a CON to add a cardiac catheterization laboratory and open heart surgery program at its facility in Ft. Pierce, Florida, be denied. RECOMMENDED this 16th day of March, 1987 at Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of March, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1539 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. By Petitioner - Lawnwood 1 & 2. Accepted and incorporated. 3 & 4. Accepted and incorporated. 5. Accepted and incorporated. 6. Accepted and incorporated. 7. Accepted and incorporated. 8. Accepted and incorporated. 9. Accepted and incorporated. 10. Accepted and incorporated. 11. Accepted and incorporated. 12. Accepted and incorporated in substance. 13. Accepted and incorporated in substance. 14. Accepted and incorporated in substance. Rejected as indicating a need for 2 additional cath labs. Rejected as calling for determination of "not normal status for District IX. Accepted in general but rejected insofar as there is an implication that non-indigent patients experience "significant" difficulty securing treatment. Accepted. 19 & 20. Accepted as to the streptokinase patients specifically. Accepted but not considered to be of major significance. Accepted and incorporated. 23 & 24. Accepted and incorporated. 25 & 26. Accepted and incorporated. 27 & 28. Accepted and incorporated. 29. Accepted. 30 & 31. Accepted and incorporated in substance. 32. Rejected as not supported by the best evidence. 33-36. Accepted and incorporated. Rejected as contrary to the evidence. Accepted. 39-42. Accepted. By Intervenor - St. Mary's 1 - 4. Accepted and incorporated. 5 & 6. Accepted and incorporated. 7 - 9. Accepted and incorporated. 10. Rejected as not supported by the best evidence. 11 & 12. Accepted and incorporated. Accepted and incorporated. Accepted and incorporated. Rejected as not supported by the best evidence. Accepted. Accepted. Accepted. 19-21. Merely a summary of testimony. Not a Finding of Fact. 22-24. Summary of testimony. Not a Finding of Fact. Accepted as ultimate Finding of Fact. Rejected. Rejected as a summary of testimony. Not a Finding of Fact. Irrelevant. Accepted. Accepted. Subordinate. 32-36. Rejected as a recitation of testimony and not Finding of Facts. 37-40. Rejected as contrary to the weight of the evidence. 41 & 42. Accepted. 43-46. Accepted. Rejected. Irrelevant. Accepted. Rejected. By Intervenor - PBGMC 1 & 2. Accepted and incorporated. Accepted except for last sentence which is irrelevant. Accepted. Accepted and incorporated. 6 & 7. Accepted and incorporated. Accepted. 9. Accepted and Incorporated. 10 & 11. Accepted and incorporated. 12. Accepted. 13-16. Accepted and incorporated. Accepted. Accepted. Rejected ultimately as contrary to the weight of the evidence. Accepted. Rejected. Accepted. 23 & 24. Accepted. 25 & 26. Rejected as contrary to the weight of the evidence. 27. Accepted. COPIES FURNISHED: Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Thomas A. Sheehan, III, Esquire 9th Floor, Barnett Centre 625 North Flagler Drive West Palm Beach, Florida 33401 R. Bruce McKibben, Esquire 1323 Winewood Blvd. Building 1, Room 407 Tallahassee, Florida 32301 Eleanor A. Joseph, Esquire Harold F.X. Purnell, Esquire 2700 Blairstone Road, Suite C Tallahassee, Florida 32314 Robert S. Cohen, Esquire 306 North Monroe Street Post Office Box 10095 Tallahassee, Florida 32302
